Royalty Review: Mineral Rights for the Mind

Nov 07, 2014

If you have money, you have to do something with it. Even stuffing it under the mattress is a choice and a risk. If savings do not exceed the rate of inflation, the purchasing power of one's savings is diminished over time.

Purchasing power of US dollarConsider that $1000 in 1995 would only be able to purchase worth $430 of goods in 2014 -- this means half your purchasing power was destroyed in just twenty years.

And, this occurred during a period in which inflation was considered low by historical standards. The figures are even more striking if you look at the past one hundred years. In the last century, the US dollar lost nearly 96% of its purchasing power. Shortly put, to keep money, it needs to grow.

As as part of a diversified portfolio, music royalties have the potential to outpace inflation and grow the purchasing power of one's savings. Unlike stocks, royalties do not appreciate in value, nor is there an expectation of selling at a higher price.

Their economic benefit comes from the income received, which for many royalties has historically exceeded the rate of inflation by a considerable margin.

Dr. Dre online auction

Because they're streams of cash flow and not shares in a company, many people assume that royalties are solely for older investors living off their income. However, even younger investors who are still working can find value in receiving quarterly checks, or in the case of Royalty Exchange Inc., fee-free PayPal payments.

Investors buy real estate, mineral rights, private businesses, taxicab medallions, even stock exchange memberships to earn passive income and diversify their holdings. Music royalties fit that category. They're mineral rights for the mind.

Keith Shocklee Music Royalty Auction, Sold 8/18/2014 for $37,000 on Royalty Exchange. (Image courtesy of Royalty Exchange)

Like annuities, passive income investments such as music royalties provide both a financial and a psychological benefit: regular income likely to outpace inflation and the reassurance of a steady above-market cash flow.

That the income music royalties are dependent on the use of intellectual property, not stock or market forces, makes it unique among alternatives.

Why not let Dr. Dre pay your monthly mortgage? In our brave new world, you can.

Click here to see royalties at auction on Royalty Exchange. 

For more information on royalty investing check out these other Royalty Review articles by guest columnist and investment analyst, Jonathan Hoenig:

"Make Your Music Royalty Mutual Fund"

How to think of Royalties

A Royal(ty) Return

Diversify with Music

Is Liquidity Overrated?

Let Royalties Help Slice the Pie

When Music Appears in a Film