Traits of a Potential Financial Investment
- ROI (Return on Investment): A good investment provides positive returns through capital appreciation, dividends, or interest.
- Risk Tolerance: Choose investments aligned with your comfort level regarding potential value fluctuations.
- Diversification: Build a balanced portfolio to spread risk and offset poor performance in one area with positive results in others.
- Liquidity: Consider how easily an investment can be converted into cash without affecting its market price.
- Market Conditions: Opt for investments aligned with current and future economic, market, and geopolitical factors. Conduct thorough research to understand historical performance and future prospects.
- Long-Term Viability: Evaluate the long-term growth potential and stability of the investment.
- Costs and Fees: Be aware of associated expenses that may impact returns.
- Alignment with Goals: Ensure the investment aligns with your financial objectives, whether short-term gains, long-term growth, or income generation.
Now, let’s consider whether a furniture piece could be a good investment. Let’s follow through with a specific item. Today, I’ve chosen the well-known:
Eames Lounge Chair & Ottoman
The Eames Lounge Chair and Ottoman, designed by Charles and Ray Eames in 1956, aimed to provide a welcoming comfort resembling a well-used first baseman’s mitt. Breaking away from their usual designs, the chair utilized innovative molded plywood and rosewood veneer, setting a new standard. Introduced by Herman Miller, it quickly became a mass-produced luxury icon, featured in TV shows and museums. Its timeless design, celebrated on its 50th anniversary in 2006, continues to be in production, maintaining its influential status in American furniture history.
This piece has stood the test of time. According to the book The Story of Eames Furniture (Neuhart, Marilyn and John, 2015), the final production prototype would retail at $310 per unit. Unfortunately, I cannot find specific evidence for this in archives. However, if we base our calculations on this, adjusting for inflation, we can say that $310 in 1956 is equivalent in purchasing power to about $3,515 today. Nevertheless, the current market price for the product is between $5000 and $10000 depending on the materials used. According to this, the inflation-adjusted annual average growth of the chair’s value is 3.41%.
We can draw valuable conclusions from the dynamics of the chair’s auction prices as well. I have created a chart illustrating the estimated values assigned to individual pieces at various auctions between 2000 and 2024 and the actual USD amount each chair sold for. We can observe that the estimated value tends to increase over the years; and to top it all off the realized prices almost consistently exceed the estimates.
These numbers underscore their potential for positive ROI. Over 24 years of auction prices and considering the chair’s average appreciation, the enduring appeal and recognition of these items contribute to a sense of stability in their value, mitigating potential risks. The current market prices for new Eames Lounge Chairs and Ottomans indicate a level of liquidity, allowing investors to convert their investment into cash without significantly affecting market prices.
Liquidity provides flexibility in the investment portfolio, which can be beneficial in our case, as furniture may not traditionally be seen as part of a financial portfolio. However, the chair’s uninterrupted appreciation and popularity since 1956, along with its cultural importance and lasting appeal, can provide a unique and stable asset within a diversified investment strategy, balancing risks and potential rewards. The fact that it is considered a cultural treasure, preserved by collectors and museums, contributes to its stable market.
Of course, determining whether something is a good investment is inherently unpredictable and requires extensive analysis and research. If you’re interested in furniture design and would like to enrich your portfolio with timeless pieces, consider exploring iconic items such as the Noguchi Coffee Table, Hans Wegner Wishbone Chair, CH07 Chair, or even the Chesterfield Sofa.
