The Things Celebrities Invest In

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  • Article by Amy Bradney-George
  • May 07, 2015 at 2:50 PM

Celebrities can be worth millions of dollars each, but that money doesn’t usually sit in a bank account waiting for the day they need it.

People with money tend to make more use of their money, often with the outcome of making even more money, or safeguarding their fortunes for the future. But whether or not that’s the goal, it makes sense that the rich and famous would spend some of their fortune developing a portfolio of investments.

According to Mark Sands, an insolvency practitioner at accounting firm Baker Tilly, celebrities often invest to avoid future struggles over taxes or significant changes in their income.

“If they’re no longer the hot topic, then their income changes, and they usually cannot adjust to their new income level,” he says in an interview with The Daily Telegraph.

Sands has worked on a wide range of celebrity and footballer bankruptcies over the years and says investments are one of the most popular ways for celebrities to manage their money.

Almost every household name, for example, has at least a few properties to their name, while a lot of others are busy developing brands in the fashion and cosmetics industry, or even putting money back into their own industries.

Celebrities or “Celebpreneurs”?

While traditional investments are still popular with celebs (more on that later), a growing number of celebrities are also investing in startups or even creating their own businesses.

Australian supermodel Miranda Kerr is a good example: she launched her skincare range KORA Organics back in 2009 and is now CEO of the company, which recently expanded from Australia and the US into Asian markets.

More recently, rapper Snoop Dogg has been in the news with plans to invest $25 million in cannabis startups through a venture capital fund. The hip hop star has also invested in Reddit, and a zero-fee stock trading platform called RobinHood. But as TechCrunch notes, his latest hustle actually follows the lines of popular advice for new investors:

“Invest in what you know.”

That advice has proven successful for many investors, regardless of celebrity status, and is promising for startups like The Dollhouse Collective – a female production company co-founded by Australian actress (and now producer) Rose Byrne. She joins the likes of Will Ferrel, Judd Apatow, Reese Witherspoon and Ben Affleck as actors and filmmakers that have started companies within their industry.

Meanwhile, fellow film star Jessica Alba co-founded Honest Co, an online-based retailer of personal care products, in 2011. With an estimated value of $1 billion, it’s clear Alba’s as much a businesswoman as she is a star.

Other celebrities are just as diverse with their entrepreneurialism. Ashton Kutcher, for example, is one of the most prolific celebrity investors, putting money into startups like Airbnb, and even founding his own fund for the purpose: A-Grade Investments.

Jared Leto also got his tech on when he invested in Nest – a company that says it “reinvents unloved products in your home”, such as thermostats and smoke alarms. It paid off for him too, with Google buying the company for $3.2 million in 2013.

But while there are reports of everyone from Justin Bieber to Leonardo DiCaprio making these kinds of venture capital moves, it’s just the latest trend in a long line of investment opportunities celebrities take. So below are some of the other popular (and sometimes surprising) ways stars put their money to use.

Real Estate

While many people struggle to make mortgage repayments on one home, celebrities often have a whole portfolio of houses and apartments around the world. Daniel Radcliffe, for example, owns property in the UK, US and in Australia – and even planned to sell a $2.8 million Toorak property earlier this year before deciding to keep it for his own use.

Diane Keaton, on the other hand, has an investment-based hobby of restoring old homes, particularly Spanish Colonial houses in California.

“I’d buy every one of them that comes up for sale if I could afford it,” she says in an interview with the LA Times.

The acclaimed actress has been doing up houses since the 80s, with varying degrees of financial success – in 2000, for instance, she sold one of her restored homes to Madonna for $6.5 million.

Then there’s Arnold Schwarzenegger, who actually says he made his first million investing in property. In his biography, Schwarzenegger recalls how he saved money from bodybuilding competitions and successfully invested in US real estate well before The Terminator hit the screens.

He still has a vast portfolio of investment and personal properties, and recently spoke about his experiences at a real estate conference in Australia, and while touring around to promote his role in a recent RealEstate.com.au ad campaign.

“I always felt that the most important thing was not how much you make, but how much you invest, how much you keep,” he says in his biography.

“My goal was to get rich and stay rich.”

While Schwarzenegger applied himself to real estate with as much zeal and bodybuilding and the movies, many other stars have failed to make financial gains from real estate, including Michael Jackson, Toni Braxton and Nicholas Cage.

Despite the risks, real estate is by far the most popular investment for stars to make – after all, it gives them places to stay away from the prying paparazzi and adoring fans.

Fashion

Fashion and fame go hand-in-hand, and many celebrities have invested in fashion brands or created their own. Dannii Minogue is a good Australian example: the singer and X-Factor judge currently has her own line with Target, and back in the 80s she had a line for competitor Kmart.

Then there is former Posh Spice, Victoria Beckham, who has made a very successful second career out of her fashion line, as has singer Jessica Simpson. Similarly, former childhood twin stars Mary-Kate and Ashley Olsen are now better known for their fashion than their cutesie roles on Full House, while the Kardashian “Klan” continue to break expectations with their range of fashion accessories, handbags, make up and perfume lines (among other things).

But like with real estate investments, a lot of celebrities venturing into fashion have had to deal with financial failure. Kanye West, for example, has been trying to break into the fashion world with clothing lines for at least the past four years, with more failure than success. Mandy Moore similarly bombed out when she launched her fashion line Mblem in 2005 (and if you’ve never heard of it, that’s why).

According to fashion reporter and author Teri Agins, whose book Hijacking the Runway details some of the most notorious celeb forays into fashion, there’s a strong connection between focus and success for celebrity fashion lines.

In an interview with Elle in 2014, she explains that while a name will get celebs some sales, “this fashion animal is a hard one to tame, and it’s one that requires a whole lot of dedication”.

“Yes, celebrities can immediately pole vault ahead of everybody else. People will buy [their products] once. If the clothes continue to deliver, they’ll buy them again. But you can’t base a fashion business on just fans,” she says.

“The people who have succeeded—Victoria Beckham and the Olsen girls—they have done so because that is their one and only job. They don’t phone it in.”

As for those that lend their name to something – such as the many celebrity perfumes, or Pink’s range of undies with Victoria’s Secret – it seems keeping the line small and focused is a bit part of the success.

Tech Companies

Investing in tech companies and Silicon Valley startups is a big part of the “celebpreneur” trend. Ashton Kutcher really takes the cake here, with a reported 43 current investments in tech-related companies. He’s also a regular speaker at tech conferences and has a paid business partnership with computer company Lenovo.

But giving him a run for his money is Bono, who has not only been in the investor game for longer, but has also made at least $600 million through high profile investments in companies including Dropbox, Facebook, Forbes, Yelp and MarketShare. Like Kutcher, Bono has his own venture capital firm: Elevation Partners, which he co-founded in 2004.

Justin Bieber’s foray into tech has been a bit more hit-and-miss. While the pop star has invested in popular music service Spotify, he’s also put $1.1 million towards a flailing photo-sharing app called Shots of Me. Leonardo DiCaprio has had a similar struggle with Mobli, another photo and video sharing app. While he invested some $4 million into the company and took on an advisory role in 2011, the future of it is still up in the air.

Justin Timberlake might be able to relate, after investing heavily in Myspace, as well as startups Stipple and Miso Media. As Inc Magazine says, the singer and actor may have played Sean Parker in The Social Network “but his investments haven’t fared quite as well as his character’s”.

While there are a lot of success and failure stories when it comes to celebrities investing in tech startups, it appears to be the next big thing for famous people to put their money into.

Domain Names

This is more a security investment than many of the others, as celebrities spend hundreds or thousands of dollars making sure other people don’t exploit their names and brands.

Once again, Ashton Kutcher is a great example, recently talking about how he quickly registered domain names for his daughter once he and Mila Kunis had decided what to call her.

“We immediately went home and we reserved all the domain names,” he says in an interview with Conan O’Brien.

“I don’t want a porn site with my daughter’s name. It’s unacceptable to me and it’s not gonna happen.”

The same protective parenting is probably what motivated Angelina Jolie to register domain names for her children as they were born or adopted. In 2006, when Shiloh Jolie-Pitt in 2006, the media reported that she had registered 24 domain name variations, and in 2008 she and Brad Pitt did the same for twins Knox and Vivienne Jolie-Pitt.

The movie star and humanitarian appears to place a lot of value on domain names, because she has even set up an endowment fund to allow parents in Namibia to buy domain names for their kids.

Other celebrities have made more business-minded investments in domain names, like Fifty Cent, who purchased 50InDa.Club in 2014 and went on to be a big promoter of the new global top-level domain .Club.

As more celebrities start their own businesses, they are also seeing the value in adding domain names to both their professional and personal portfolios. Then again, very few have made a profit out of selling this online property, so some could argue that the investment value is yet to be seen.

While celebrities often have the money to buy all kinds of things most people only dream of ever owning, there is a major downside to the way most of them make investments. Baker and Tilly’s Mark Sands says the reason so many celebs go bust is actually because very few of them save money the old fashioned way.

“Any high earning celebrity should be putting thousands, or even millions, away each month. But they don’t,” he says.

In his interview with the Daily Telegraph, he also explains that stars often have “much more control of their gross income” and pay tax irregularly due to the project-based nature of their industries.

“Then the taxman turns around and says – ‘excuse me, you’ve carried on earning but you still owe tax’ – and they get a massive bill that they can’t pay.”

And the number of people in the public eye with debts and bankruptcy to their names suggests there’s a lot of value in investing in an old-fashioned piggy bank, regardless of status and stardom.

Images: Arnold Schwarzenegger looks at a house in the realestate.com.au ad campaign, source: YouTube; Ashton Kutcher at a tech conference, source: TechCrunch (Flickr)

 

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