Masterworks Review 2023: How To Invest In Artwork

Masterworks is an innovative company that radically transforms how people purchase and own fine art.

By making high-end artwork more accessible and affordable, Masterworks has created a unique way for anyone to invest in and own world-renowned art pieces.

Whether you’re an experienced collector or just starting to invest in fine art, you’ll have the opportunity to make money from art and grow your portfolio.

So if you are ready to start your journey into the world of fine art collecting, then read our review on Masterworks below!

Masterworks Review

Our Masterworks Review 2023 will provide an overview of what the Masterworks platform offers, how it works, and why it could be an excellent option for those who want to diversify their portfolios with fine art.

Let’s get started:

What Masterworks Is

Masterworks is a website that helps people buy and sell pieces of art. These art pieces are made by famous artists and are worth a lot of money.

You can use Masterworks to invest in these pieces without having to pay hundreds of thousands or even millions of dollars all at once.

Masterworks makes investing in these blue-chip art pieces easier by selling smaller (fractional) shares.

Fractional art investing means you can buy a part of a piece of art instead of the whole thing, making it less expensive for you, but you also get payouts when it appreciates and sells.

They offer a lot of different pieces of art for Masterworks investors to choose from, and they are all made by famous and up-and-coming artists.

Masterworks uses unique technology and a secure online system to make it easy and safe for people to invest in the art market.

If you are interested in art and want to make money, Masterworks might be a good choice.

Who Can Invest

At Masterworks, anyone over 18 can invest in these alternative investments. All you need to do is request an invitation to join the platform and become a member.

You don’t need prior experience in art investing, as the platform provides all the tools and guidance necessary to make informed decisions about the alternative investments available on their platform.

Masterworks investors aren’t millionaires; you don’t have to be rich to invest in the art market.

Investing through Masterworks is far less expensive than traditional forms of art investment, such as buying gallery pieces or bidding at auction houses.

Investment Offerings & Key Features

Wide variety of classic and contemporary art: Masterworks offers investors the ability to choose specific works of art to invest in, becoming partial owners of the piece. The selection of art available through Masterworks is comprehensive and includes classic and highly regarded pieces. Each piece is registered with the Securities and Exchange Commission (SEC).
Sales and research reports: Masterworks provides detailed artwork data and sales reports to investors so they can make informed decisions. The company has access to excellent research resources that include a wide range of historical auction data, offering information on the art history that includes average price, sale history, and the estimated value of each art piece.
Comprehensive global art report: Masterworks offers comprehensive global art reports that keep investors up-to-date on the latest art world trends, market shifts, and emerging artists.
SEC Registration: Masterworks is a fully registered broker-dealer with the Securities and Exchange Commission (SEC). The federal government regulates the company’s investments, ensuring maximum security for all investors.
Secure art storage: Masterworks stores art in a safe place. The art is in a temperature-controlled, museum-quality art gallery. Your 1.5% annual management fee helps keep the artwork safe and sound.
Secondary Market: Masterworks offers access to an investor’s secondary market trading platform. This is a place where you can buy or sell your shares using the company’s online bulletin board. If you want to sell your shares right away, you can use this method.

Masterworks Cost & Fees

The Masterworks fees help pay for the extra costs of managing artwork. These costs include storage, appraisal, insurance, and SEC regulatory fees.

A few Masterworks fees are charged to art collectors – an annual management fee, transaction fees, and a commission on the profits when the artwork is sold.

The fee structure is based on the total value of your account. It is not paid in cash but is deducted from the number of shares you own over time:

Annual Management fee: 1.5%

Profit Commission: After the artwork has been held in a portfolio for 3 to 10 years, Masterworks sells the piece on the open art market and collects 20% of its profits, similar to a hedge fund.
Transaction fees: These fees aren’t charged if you sell your shares on the Masterworks secondary market. In other words, investors won’t owe anything when they buy or sell art-backed securities on the Masterworks secondary market.

Estimated Return On Investments

As an investor, it’s essential to remember that there’s no guarantee that any fine art investments will produce a positive return on investment.

It isn’t easy to measure how Masterworks’ business model has done in the past because it has only been around for five years. However, over the last five years, Masterworks has seen some impressive results.

According to Forbes, Masterworks has experienced a remarkable success rate of 17.8% in terms of profitability through selling seven works of art.

Safety & Security

According to the Masterworks website, Masterworks is very careful with security. They have a lot of different safety protocols to protect investors.

The artwork is stored in temperature-controlled museum-grade galleries, and all art offerings are registered with the SEC when Masterworks purchases art.

Customer Service

Masterworks customer service can be reached by emailing them at support@masterworks.io. They can also be reached by phone at 203-518-5172 between 9 am and 6 pm Eastern Time.

Risks & Returns Of Art Investments

Risks:

As with any investment, there is the risk that the value of the artwork may not appreciate as expected or may even decline in value.

This can be influenced by various factors, such as the artist’s reputation, the condition of the piece, and the demand for the artist’s work.

Art is often considered an illiquid asset, meaning it can be difficult to sell quickly, especially if there is no vibrant market for the artist’s work.

It can make accessing the funds invested in art more difficult if they are needed in the short term.

Returns:

Investing in fine art through the Masterworks platform aims to achieve capital appreciation over time.

This means that the value of the artwork is expected to increase, and the investor could potentially sell the artwork for a profit in the future.

Investing in fine art with Masterworks could diversify your investment portfolio. Diversification can help manage risk and improve the potential for a profitable investment return.

With an array of assets to choose from, you have access to countless opportunities to manage your financial future.

Investing in fine artwork provides potential financial rewards and brings immense personal satisfaction and joy.

Possessing famous paintings by acclaimed artists is a memorable experience that cannot be replicated elsewhere – regardless of the monetary return you make when you buy fine art.

Signing Up For Masterworks

Masterworks is different from other investment platforms because you don’t have to be an accredited investor to join.

You do have to be 18 years of age and a U.S. citizen to invest in Masterworks.

Before signing up for a Masterworks account, you need to visit the Masterworks website here, request an invitation to become a member, and go through a telephone interview.

A phone interview is required because Masterworks aims to make an individual connection with its clients and verify your identity.

During the phone interview, they’ll also answer any questions you may have about Masterworks usability, like how to tell the minimum investment on contemporary artwork or how contemporary art prices are determined.

Once you become a member, you’ll finish setting up your Masterworks account and link your bank account to your account. Then you can start building your investment portfolio with fractional shares of the Masterworks offerings.

Pros & Cons

Pros

Simplifies the experience of finding, purchasing, and preserving fine artwork – from start to finish
Has a contemporary art price database to search for specific artists, track the information about the classic and contemporary artwork
Secondary market available for you to sell your fractional shares earlier than 3 to 10 years
No minimum investment is required to invest, and investors don’t have to be accredited
Masterworks files the artwork with the SEC after it buys it

Cons

Passive income stream isn’t created by investing in fine art; it’s only capital appreciation
Each piece of art takes 3 – 10 years to sell unless they’re sold on the Masterworks secondary market
Little historical data because only a few investments have been exited so far
Their fees are similar to a hedge fund

Other Investment Alternatives

While investing in art through Masterworks is a great way to diversify your portfolio with contemporary art, no Masterworks review would be complete without giving you some other options for investing.

Real Estate Investments

Real estate investments include buying residential or commercial property, which presents attractive opportunities for investors.

 It’s now possible to buy fractional real estate shares with companies like Fundrise. Fundrise helps novice and expert buyers purchase fractional shares of real estate projects in major US cities.

The online platform gives users detailed information about the progress and performance of each project, so buyers can easily make smart decisions and track their investments.

Stock Investments

If you’re looking for other investment alternatives to Masterworks, consider exploring the world of stock investments.

The stock market allows investors to grow their wealth by buying and selling stocks in companies they believe are profitable or will become profitable over time.

One way to do that is with Robinhood. With Robinhood investing, even fractional stocks can be purchased for as little as one dollar!

In addition, Robinhood allows investors of all financial backgrounds to access more complex investment options such as options and cryptocurrency investments.

It provides an excellent way for new investors to diversify their portfolios without breaking the bank. Plus, you get free stocks for signing up!

Retirement Investments

There are a lot of opportunities for investors to grow their money and have a steady income with retirement accounts, such as 401ks and IRAs.

With these accounts, investors can achieve a comfortable degree of risk management by diversifying their portfolios with multiple stocks or funds that align with their objectives.

We should all pay close attention to retirement as early as possible. Betterment makes it easier than ever to invest confidently toward your retirement goals.

Opening an account with Betterment is simple – and with no account minimums, you can start investing for the future without breaking the bank.

Small Business Investments

Small business investing is an excellent option for those seeking an alternative to Masterworks.  

There are several ways to invest in small business ventures – providing outside capital or becoming an angel investor (providing money with the added benefit of your knowledge and expertise).

One way to invest in small businesses is with Mainvest. Mainvest connects investors of all sizes with local entrepreneurs needing additional capital.

Aligning with a local business can give an investor an inside perspective on the economic landscape and a network of entrepreneurial contacts that can produce significant dividends down the road.

Farmland Investments

One underrated alternative for consideration is farmland investments.

Land investment carries several advantages over traditional investments, such as tangible asset ownership and underlying value from the land itself.

In addition, farmland values have historically been a more stable asset than stocks which can provide more reliable long-term returns for investors.

I’m always looking for great investments, and I recently discovered FarmTogether. It lets you invest in farmland without buying or operating a farm.

Instead, your money goes towards buying agricultural land through collective investments, and then you share the bonus when it’s sold at a profit.

FAQs

Is Masterworks legit for art investments?

Masterworks is a legitimate investment platform for investing in art.

It offers investors the opportunity to purchase artwork shares from the world’s top artists, providing access to unique, easy-to-trade assets with low barriers to entry.

How much do I need to invest in art?

There is no set amount you need to invest in art, as it can vary significantly depending on factors such as the artist, the medium, the size of the work, and the demand for it.

Some artists’ works can sell for tens of thousands of dollars, while others may sell for just a few hundred dollars.

If you are interested in investing in art, start by setting a budget for your purchases and doing some research to understand the market and the art types that interest you.

It can also be helpful to seek the advice of an art expert or visit art galleries and auctions to get a sense of the current market and to see works by different artists in person.

How does Masterworks pick art pieces?

According to the company’s website, the process of selecting artworks for the Masterworks portfolio involves several steps, including:

Identifying blue-chip artists: The company focuses on blue-chip artwork by classic and contemporary artists with a proven track record of selling at major auction houses and whose works are held in major museum collections.
Evaluating the artwork: The company uses a combination of data analysis and expert assessment to evaluate the potential appreciation of each work and its suitability for the portfolio.
Determining the price: The company uses a proprietary pricing model to determine the initial offering price for each work based on factors such as the artist’s reputation, the condition of the work, and market demand.
Offering the artwork to investors: Once a work has been selected and priced, it is made available to art buyers through the Masterworks platform.

Is art a risky investment option?

Like any investment, art investments carry some risk, and there is no guarantee of a return on your investment.

The value of an artwork can be influenced by various factors, including the artist’s reputation, the artwork’s condition, market demand, and economic conditions.

Some experts consider art to be a relatively risky investment compared to more traditional assets such as stocks or bonds, as the value of art can be challenging to predict and fluctuate significantly.

What is an illiquid asset?

An illiquid asset is an asset that cannot be easily converted into cash or sold quickly. Illiquid assets may include real estate, private equity deals, works of art, and collectibles.

In contrast, liquid assets such as stocks can be easily converted into cash or sold more quickly, sometimes even on the same day you buy them.

The liquidity of an asset can be an essential factor to consider when making investment decisions because it can affect an investor’s ability to access their funds.

Can I sell paintings, and how quickly after I invest in one?

Yes, you can sell paintings through a physical art gallery or online through websites like Artsy and Saatchi Art or directly to buyers through social media or your own website.

There is no set amount of time that you must hold onto a painting before selling it, as it is ultimately up to you as the owner.

However, keep in mind that the value of a painting can be influenced by factors such as the artist’s reputation, the condition of the work, and market demand.

What are some other investments that can be sold quickly for cash?

Several types of investments can be sold quickly for cash, although the specific amount of time it takes to sell and the price that can be obtained can vary depending on market conditions and other factors. 

Some examples of investments that can potentially be sold quickly to put in your bank account include:

Stocks, bonds, mutual funds, and Exchange-Traded Funds (ETFs) are some of the most liquid investments that can be sold quickly for cash. 
Mutual funds are recognized as highly liquid assets, meaning you can sell them quickly and easily when necessary.
U.S. Treasuries and Bonds can be your best bet when you need a quick sale since they are considered liquid assets, meaning you can sell them quickly with minimal effect on the price.
Money market funds provide a highly liquid option for investors, meaning they can easily access cash by selling their fund shares quickly; these funds are a collection of short-term debt securities, so the cash conversion is effortless and fast.

Key Takeaways

Masterworks provides a new opportunity for investors to invest in art without paying a lot of money upfront to buy artwork outright.

With its simple entry requirements and minimum investment, Masterworks invites people to explore a potential investment sector that could offer higher returns than conventional stocks and bonds.

When you invest in art through Masterworks, you’re making a long-term commitment. You won’t be able to sell your shares for at least 3 years, and ideally, you’ll hold onto them for 10 years or more.

Your shares can be sold on the secondary market, but it may take some time because there is no guarantee there will be a buyer on the secondary market for the shares.

It can be a great way to build wealth, but it’s not a short-term investment. Make sure you’re comfortable with the timeframe before you commit.