Masterworks Review: Invest in Art With As Little As $1,000

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As one of the oldest asset classes in the world, people have been buying and selling artwork for centuries. It also provides a unique investment opportunity for anyone wanting to diversify their portfolio.

But there’s one catch: Paintings often sell for millions of dollars, making the art market inaccessible to most investors.

That’s where Masterworks comes in. The site is democratizing the art market by allowing investors to purchase a fractional interest in an expensive art piece for as little as $500.

Are you wondering if the platform is right for you? Keep reading to learn about who Masterworks is for, how it works and the features it offers.

3.6
Overall Rating

Summary

Masterworks is democratizing the art investing world by allowing individuals to buy a fractional interest in pieces of art. Investors can get started with as little as $500 and can own a part of famous paintings without actually buying and storing them on their own.

  • Ease of use

    4

  • Commission and fees

    3

  • Customer service

    3

  • Liquidity

    4

  • Tools and resources

    4

Pros

  • More liquidity than owning art directly
  • Provides diversification to your investment portfolio
  • Art is hand-selected by art collecting experts
  • A low minimum investment compared to other forms of art investing
  • Secondary marketplace allows you to sell your shares anytime
  • Higher historical returns than the S&P 500

Cons

  • Requires a phone interview to complete the signup
  • 20% commission on profits when the artwork is sold
  • Greater risk than traditional asset classes like stocks and bonds

What is Masterworks?

Masterworks is an investing platform that has revolutionized the art investing world. It is headquartered in New York and has a team of roughly 75 employees.

The platform took a market once only available to wealthy individuals and opened it up to everyone by selling shares that represent ownership of an iconic piece of artwork.

According to the company’s website, its mission is to democratize the $1.7T art market.

Masterworks boasts that they have securitized artwork from artists like Bansky, Basquiat, Kaws and more. 

The company’s leadership team has more than 75 years of combined art collecting experience, and they have founded companies valued at a combined more than $1 billion.

Who is Masterworks For?

If you’ve ever wanted to invest in art but you don’t have a lot of money, Masterworks may be the perfect platform for you.

With Masterworks, you’ll be a partial owner of a piece of artwork without the large upfront cost and the work required to maintain and safely store it.

Furthermore, Masterworks is a great investment opportunity for anyone who is interested in artwork and wants to add alternative assets to their portfolio.

However, Masterworks isn’t right for every investor.

Artwork can be considered a high-risk alternative asset. As a result, Masterworks is only a suitable investment who can afford to lose the money they’re investing in it.

Additionally, before adding Masterworks to your portfolio, it’s imperative that you have your financial foundations in order. This includes emergency savings and retirement contributions.

How Does Masterworks Work?

Masterworks has a proven process it follows to add artwork to its collection before making it available for individuals to invest by purchasing securities.

Masterworks Finds and Purchases the Best Art

First, Masterworks uses a proprietary data set to find artist markets that are quickly growing and are expected to provide the best risk-adjusted returns.

Once Masterworks identifies the top markets, it finds the best piece available at the most reasonable price and purchases it.

Masterworks Securitizes the Artwork

After Masterworks owns the art piece, it securitizes it. The company files an offering circular with the Securities and Exchange Commission that allows anyone to invest in it.

The process of securitization is simply converting an asset into a marketable security. When Masterworks sells security, it’s basically selling a small portion of ownership in a piece of artwork.

You Invest by Buying Shares

Individual investors can get involved once Masterworks has securitized the artwork. Investors can purchase a fractional interest in artwork in $20 increments with a minimum investment of $500.

Masterworks members can buy an interest in the piece until all shares are sold.

You Make Money

There are two different ways you can make money from your Masterworks investment. These include holding the artwork or selling your shares on the secondary market.

Hold Artwork for 3-10 Years

The most common way you can earn a return on your Masterworks investment is by holding your securities until the company sells the piece of art.

At that time, the proceeds will be distributed to investors who own shares in that particular piece. Masterworks holds most pieces for between three and seven years.

However, the platform may hold a piece for up to ten years to help you get the best ROI.

Sell Shares on the Secondary Market

If you’d rather not hold your shares until Masterworks sells the piece, you can sell your shares on the secondary market.

Masterworks has a secondary market platform where investors can price their shares and others can bid on them. However, you can only sell your shares to other members.

Masterworks Features

Here are a few key features you should know about if you’re considering investing in art through Masterworks.

Price Database

The price database is a feature where individuals can learn more about famous pieces of art. It can help you learn about specific artists.

Using this database, you can see the artist’s most famous works, including their purchase price, sale price and total return. You can also view over 70 years of proprietary data with more than 60,000 datasets.

The price database is free for individuals to use even if they don’t have a Masterworks account. Simply go to the website and click the “Price Database” button at the top of the screen.

Secondary Market

Masterworks investors can make money by selling their shares on a secondary market. This is hosted right on the platform’s website.

When you visit the market, you can see all of the shares that are currently for sale from various members.

You’ll see the sale price and be able to view the seven-day weighted average price that shares of the piece have been bought and sold at.

While Masterworks hosts the platform, it’s up to the buyer and seller to agree on a fair price. If you want to buy shares at a price lower than the asking price, you can simply offer less.

To buy or sell on the secondary market, you must have a Masterworks account.

Risk Classification

Whether you’re investing in art through Masterworks or any other investment, it’s important to consider the risk. The risk associated with art investing isn’t quite the same as the risk of investing in stocks or bonds.

In general, the larger an artist’s market size, the lower the level of risk of a particular piece. The most well-known artists with decades of proven sales will fall into this category.

On the other hand, newer artists without a long history of sales will result in a higher-risk investment.

Masterworks primarily focuses on purchasing art from artists with a long history of sales. You won’t typically find a piece for sale on the platform from an artist in a high-risk category.

Masterworks Fees

Like most investing platforms, Masterworks has a couple of different fees that investors can expect to pay.

First, Masterworks charges a 1.5% annual management fee. This is paid in the form of equity at no out-of-pocket cost to you.

The management fee covers things like:

  • Professional storage
  • Regulatory filings
  • Insurance, appraisals
  • Other administrative costs

In addition to the management fee, you’ll also pay 20% of your future profits to Masterworks. This fee is essentially a commission that Masterworks takes for selling your investment on your behalf.

The good news is that because this is a percentage-based fee, you only pay a commission if the piece sells for a profit.

Since this is a percentage of your profit and not your original investment, you don’t actually pay this amount out of your own pocket. It simply comes out of your final payout.

FAQs

You may have additional questions before you sign up for Masterworks. Here are some answers that can help you determine if the platform is right for you.

Is Masterworks safe?

Generally speaking, Masterworks is safe. However, anytime you invest, your money isn’t entirely safe.

There’s always a chance that your investment could lose money. As a result, it’s recommended that you only invest in this type of asset with money you can afford to lose.

Fortunately, Masterworks is safe in other ways. For example, all the art purchased is insured and held in a secure, temperature-controlled gallery.

What customer service options does Masterworks offer?

Masterworks make it easy to contact them. You can call them at 203-518-5172 or email them at support@masterworks.io. between 9 a.m. and 6 p.m. Eastern.

The company also has social media profiles where you can reach out for assistance.

How do I sign up for Masterworks?

Masterworks has a waitlist and requires an invitation to join. When you visit the company’s website, you can click the “Request Invitation” button at the top of the screen.

From there, you’ll be taken to an application page where you must share your name and contact information. Many investors receive their invitation to sign up within days or even hours of joining the waitlist.

Once you receive your invitation, you can sign up and connect your bank account. Then you can actually start investing.

It’s important to note that Masterworks also requires a phone interview as a part of its registration process. Most other investing platforms do not have this stipulation.

Is Masterworks legit?

Yes, Masterworks is legitimate. The company’s art holdings are registered with the Securities and Exchange Commission. This means that they are fully legal and regulated investments.

Summary

Since launching, Masterworks has made good on its promise to democratize the art market.

Paintings that are valued at millions of dollars and inaccessible to most people can be bought and sold in the form of fractional shares for as little as $500.

Masterworks presents a unique opportunity for art enthusiasts and those who want to add another asset class to their investment portfolio. Nevertheless, it’s important to understand the risks that come with art investing.

As an alternative asset investment opportunity, Masterworks has a higher level of risk than much of the investing you currently do. Proceed with caution and only invest money you can afford to lose.

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