Masterworks Art Investing Review 2022: FAQs, Pros & Cons, Features

Masterworks makes it possible to invest in fine art online. Learn how this online platform works and how to invest in works of art.
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By Rebecca Lake

A woman looks at art in a museum

 

Diversification is an important part of managing risk as an investor.

Expanding your portfolio to include works of art is one way to add a new asset class to your portfolio, alongside the usual mix of stocks and bonds.

Masterworks is an online platform that makes that possible.

You can invest in multi-million dollar paintings from some of the world’s most famous artists from the comfort of your own home.

Curious about how it works?

Our Masterworks review offers a closer look at how to invest in art online.

What Is Masterworks?

Masterworks is an online platform that offers investors access to fine art. The New York-based company launched in 2017, with the goal of offering investments within the art market.

Today, more than 100 paintings are available for investment through Masterworks.

Investment opportunities feature works of art from a variety of notable artists, including Andy Warhol, Pablo Picasso, Jean-Michel Basquiat, and Banksy.

Masterworks Snapshot

  • Invest in fractional shares of fine art online
  • Choose from direct investment or the secondary market
  • No minimum investment required
  • Wide range of ‘blue-chip’ artworks to choose from
  • Open to accredited and nonaccredited investors

How Masterworks Works

Masterworks is unique from other online investment platforms in that it deals specifically with the art market.

You won’t find stocks, mutual funds, or real estate on offer here.

Instead, you’ll have access to a carefully curated collection of artists and their works.

Invest in multimillion-dollar paintings

Masterworks makes it possible for investors to hold fine art in their portfolios by purchasing fractional shares.

The platform uses proprietary data to decide which paintings to offer to investors and purchase the work.

Once a piece of art is acquired, it’s securitized through the Securities and Exchange Commission (SEC).

The art is then offered for investment through Masterworks in the form of fractional shares. Investors can buy in without having to spend millions on a single piece of art.

Attractive historical price appreciation

Central to the way Masterworks operates is the belief that contemporary art has the potential to outperform other asset classes.

According to Masterworks, the art market has delivered a 13.8% return over the last 25 years, compared to 10.2% for the S&P 500 and 8.9% for real estate.

Art can also be a strong hedge against inflation. On average, contemporary art delivers a 13.5% average appreciation during periods of high inflation, versus 5.5% for the S&P 500 and 0.5% for bonds.

Buy and sell shares on the secondary market

Investors have two options for adding art to their portfolio with Masterworks.

You can invest and hold the art until Masterworks sells it. Or you can buy and sell shares on the secondary market.

If you own fractional shares of art, you can list them for sale in the Masterworks marketplace.

You can also browse listings for shares for sale and buy them, according to your needs and investment objectives.

Buying and selling on the secondary market can offer greater liquidity versus waiting out the holding period.

Receive proceeds when the painting sells

Once a painting sells, the issuing entity is liquidated.

Selling expenses are deducted, then the net proceeds from the sale are distributed among investors.

The typical holding period for a Masterworks investment is three to 10 years.

Masterworks makes its investment choices based on which artists or works of art have the most forward momentum. So that’s something to keep in mind if you don’t plan to trade on the secondary market.

Compare Masterworks Invest to Other Investments

Investing in art may be new territory and you may be wondering whether it’s the best way to invest money.

When deciding where and how to invest, it helps to consider all of the options that might be available to you.

Here are three other options for building your portfolio.

Vanguard

Vanguard is a well-known name in investing and it’s notable for introducing the index fund back in the 1970s.

When you invest with Vanguard Personal Advisor Services you can get access to a wide variety of low-cost investments, including stocks, exchange-traded funds (ETFs), and options.

You’re not investing in art but you might appreciate the ability to connect with professional financial advisors and pay low management fees. There is a $50,000 minimum to use Personal Advisor Services.

RealtyMogul

RealtyMogul is similar to Masterworks, in that it offers access to alternative investments. Instead of art, however, you’re investing in crowdfunded real estate.

Similar to art, real estate can be a good hedge against inflation. You’ll need $5,000 to get started investing with RealtyMogul.

Crowdstreet

Crowdstreet is another real estate investing platform but it’s a little different than RealtyMogul.

When you invest here, you have the opportunity to buy into a real estate investment trust (REIT).

A REIT is a legal entity that holds and invests in real estate. The great thing about REITs is that you can get dividend payments during the holding period. There’s a $25,000 minimum to invest.

Top Features of Masterworks

Masterworks takes a novel approach to investing, which could make it appealing to certain types of investors. Here are some of the key highlights to know when investing with Masterworks.

Diversification

As mentioned, diversification matters when balancing risk in your portfolio. If you’re interested in venturing into a new asset class, Masterworks could be a great way to broaden your exposure.

Access

A typical investor usually doesn’t have millions to spend on a single piece of art. Masterworks removes those barriers by accepting both accredited and nonaccredited investors, with no minimum investment requirement.

Flexibility

If you’d like to invest in a piece of art and hang onto it for the full holding period, you have that option. But Masterworks also allows you to buy and sell fractional shares of art on the secondary market, for greater flexibility and liquidity.

Return potential

Like other online investment platforms, Masterworks charges an annual management fee.

In exchange for a 1.5% annual fee, Masterworks aims to deliver 20% in future profits to its investors.

And there are no transaction fees for buying and selling on the secondary market.

Vetted investments

Masterworks doesn’t just put any type of art on offer. Instead, its research team analyzes the art market to see which investors are gaining or losing momentum in order to choose artworks that are likely to see the highest levels of appreciation.

Who Is Masterworks For?

Masterworks could be appropriate for investors who:

  • Are interested in adding art to their portfolios
  • Don’t mind paying a 1.5% annual management fee
  • Would like the option to trade on the secondary market
  • Feel comfortable with a longer investment holding period
  • Seek higher returns from their investments

On the other hand, you might look elsewhere to invest if you have no interest in art or you’re more of a day trader and lean primarily toward stocks.

How to Get Started

Masterworks is open to investors by invitation only. You can visit the Masterworks website and click the button marked “request invitation” to submit a membership application.

You’ll need to tell Masterworks your name, phone number, and email address to submit the application.

You’ll also need to specify how much you’d be willing to invest in blue-chip art over the next 12 months and when you’d like to start investing.

Masterworks will review your answers to determine whether you can skip the waitlist. If you get approved to bypass the waitlist, you’ll then need to schedule a phone interview with a Masterworks specialist.

The interview is an opportunity for Masterworks to get to know you.

And it’s also a chance to ask any questions you might have about the platform works. Once you’ve completed the interview, you can get approved to start investing in art.

Rating the Features

When considering any investment option, it’s helpful to look at the features and benefits. We’ve broken down some of the top features of Masterworks in more detail.

User experience

The Masterworks website is easy to navigate, which is a plus if you’re looking for a user-friendly way to invest.

Masterworks is transparent in explaining how its platform works, how to invest and what you might pay.

The sign-up process is fairly simple, though the phone interview requirement might rub some investors the wrong way.

Fees and rates

Masterworks charges a 1.5% annual management fee. In terms of how that compares to other investment platforms, it’s on par with what you might pay to a real estate investment site.

But it’s higher than what you might pay to a human financial advisor or for robo-advisor services.

Transparency

Investing in art might seem complicated and Masterworks attempts to make it as easy as possible.

The website does a good job of breaking down how art investing with Masterworks works, how pieces of art are selected, what you’ll pay to invest, and how much of a return you can expect on your money.

Flexibility

By nature, art is designed to be a longer-term investment as you have to wait for it to appreciate in value.

Since Masterworks investments generally have a three to 10-year holding period, that makes them a little less flexible if you need to liquidate assets quickly.

You can, however, still trade shares on the secondary market with zero transaction fees.

Customer Support

Investors can access their Masterworks account online only, there is no mobile app.

Customer support is available by email or by phone, but there is no live chat support.

Pros and Cons of Masterworks

No investment platform is perfect and Masterworks may be better suited to some investors than others.

Here’s a look at some of the most important pros and cons to know to wrap up this Masterworks review.

Frequently Asked Questions

Is Masterworks fine art legit?

Yes, Masterworks is a legitimate marketplace for fine art investments. The company researches notable artists and their art to determine which investments to offer through the platform.

How much money do you need for Masterworks?

There is no minimum amount required to create an account with Masterworks.

There may be minimum amounts needed to invest in specific artists or works of art but you can easily diversify your holdings with smaller amounts of money.

Can anyone invest in Masterworks?

Masterworks is open to investors, regardless of accreditation status. You can invest with Masterworks if you’re brand-new to the market or if you’re a seasoned investor.

About Author
Rebecca Lake joins MoneyRates as a contributor writing about banking, credit and debt, home-buying, investing, small business, and other personal finance topics. Rebecca brings her expertise as a personal-finance journalist to MoneyRates.com, having written about money for over five years. Her work has appeared online at U.S. News and World Report and many other publications.