Artwork and Collectibles: For sentiment, investment, or both?

George Gotthold Life with Money

I read recently that Sotheby’s will auction off Queen front man Freddy Mercury’s very eclectic collection of personal items this fall. Included are his handwritten notes and lyrics to Queen’s iconic anthem, “We Are the Champions.”

Sotheby’s expects to offer it at $250,000. This is an expensive piece of music history – though way short of Bob Dylan’s handwritten notes for “Like a Rolling Stone,” which sold for $2 million in 2014.

I don’t consider myself a packrat (other family members may disagree), but I do have a fair amount of “stuff,” most of which has absolutely no monetary value but does hold significant sentimental value. My office décor includes some collectibles and a fair number of personal items.

One item in particular that has absolutely no value – other than being an extremely heavy paperweight – is a jeweler’s vise from “Gotthold Jewelers,” a jewelry store my family owned and operated from the late 1800s until the early 1960s.
collectibles as investment
I did, however, learn recently that my first guitar, a 1972 Fender Mustang, is somewhat collectible – it’s appreciated significantly from the $100 it cost 50 years ago.

How much do you think it’s worth now? (Answer at the end of the article!)

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Artwork and collectibles have always had a place on the decorative walls of society. People enjoy the beauty (nothing pretty about a company stock certificate) and tangibility of art. Artwork and collectibles are great conversation starters: tell me about this piece, who is the artist? How did you learn about them, and why is the piece special to you?

We’ve all heard stories of finding valuable works of art at garage sales or stumbling upon a rare baseball card in a parent’s attic. But have you given any thought as to what you would do if you learned one of your personal possessions or collectibles suddenly increased in value? Would it change the way you look at it or appreciate it? Does it take away or add any sentimental value?

Take, for example, if you learned that painting hanging in your living room that you purchased years ago from an unknown artist is now very valuable. Do you sell it, or does it bring so much happiness to your home that you can’t imagine parting with it? Do you now think of it as an investment?
investing in artwork and collectibles
Adding artwork or collectibles to one’s asset collection can be rewarding from both a personal enjoyment perspective and – at least potentially – a financial one. In addition to artwork, some of our clients have purchased (not invested in) tangible collectibles such as a rare baseball card collection, antique jewelry, pottery, rare vintages of wine, antique cars, and music memorabilia. Everyone enjoys a conversation piece. All these items can bring value to our lives and make wonderful additions to our home.

At the same time, purchasing these types of assets can also be quite risky. There is never a guarantee that a purchase will appreciate at all, let alone dramatically. We would also call them “illiquid” assets, in the sense that they can be expensive and time-consuming to buy or sell. (“Liquid” assets, by contrast, include your investment portfolio, where purchases and sales can be done at low or no cost and very quickly.)

For most clients, artwork and collectibles aren’t part of an overall financial plan and wouldn’t be considered part of the assets needed to attain one’s financial goals. (That’s not always the case; individual client portfolios of course vary.) We would think of artwork and collectibles as existing on the periphery of one’s asset allocation. We encourage clients to enjoy them from a purely aesthetic perspective. If they appreciate significantly in value, that’s a bonus.

For clients whose artwork and collectibles are a significant asset, PPA can provide advice as to how these illiquid assets fit into an overall portfolio and incorporate them in the retirement planning illustrations we run for clients.

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In the case of my 1972 Fender Mustang – it’s now worth about $10,000. Not a bad return over the past 50 years! Not quite enough to fund an early retirement, but I could certainly find a way to spend it since my rockstar dreams never quite came to fruition.

At the same time, I’m not ready to play that last chord – so for now it’ll stay a conversation piece in my collection.

Sentimental value wins again.