Masterworks Review 2022

Jeremy Biberdorf By: Jeremy Biberdorf Nov 11, 2022
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4.5/5

4.5 rating based on 5 ratings

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In a nutshell:  Masterworks is the first innovative platform that allows you to invest in fine artwork. Masterworks’ highly skilled research team facilitates investors through a portfolio featuring the finest art pieces from across the globe.

According to recent estimates, the fine arts industry is worth $1.7 trillion privately and has recently seen a spike in popularity.

FeesMinimum Investment
1.5% Per Year + 20% Of ProfitNo Minimum.
Pros & Cons
Pros
  • The strong and well-equipped research team
  • No investment restrictions, start with $20.
  • Simple and easy-to-use platform
  • Features artworks with a high historical return rate.
  • Allows investors to choose artworks
  • Dedicated customer support
Cons
  • It's not for investors looking for liquidity.
  • Requires a phone interview before you can invest.
Minimum account requirements

No minimum investment amount.

Masterworks facilitates investors with investment options as low as $20.

Investment optionsInvestors are allowed to choose artwork of their choice and purchase as many shares as they can.
Redemption optionsWhen an art piece is sold, investors will get a profit according to the share purchased initially.

Transparency

 

Masterworks is a legit investment platform and provides an easy workflow for investors.

What Is Masterworks?

Masterworks is a unique investment platform that allows you to purchase fractional shares in fine artwork. In addition to offering low investment requirements and accessible prices, Masterworks makes it relatively easy for investors to buy shares of contemporary artwork by well-known artists like Banksy and Basquiat.

According to a statement in The Wall Street Journal, the fine arts sector had an average return of 10.6% annually.

  • Start investing with only $20.
  • Want to liquidate before the sale of artwork? Masterworks has a plan, and you can sell and purchase your shares in the secondary market.

Get Started With Masterworks Today

How Masterworks Started

Scott Lynn founded Masterworks in 2017. Despite being a relatively new concept, Masterworks understands the importance of art needing to be a relatively safe investment.

That’s why they take extreme care with every investment opportunity presented and make sure every piece of art is insured and kept safe.

To date, Masterworks has more than 400,000 investors signed up to their platform and launches a new high-end piece of artwork just about every week. Their propriety data to determine which artists’ market has more investment potential is what allows them to be so active.

Masterworks Investment Options

Once the Securities Exchange Commission (SEC) has approved a filing for an individual piece of artwork, Masterworks offers its members 90 days to purchase shares as a primary offering.

With no minimum investment, how many shares you want to buy in the artwork is depending on your risk tolerance and budget. Fractional shares tend to start at $20.

Once you have invested, you can expect Masterworks to hold onto that particular art piece for three to ten years. This gives them enough time to find opportunities to sell to art collectors or the contemporary market.

Once the sale of the artwork is finalized, Masterworks will distribute all proceeds to investors/shareholders calculated based on the number of shares held, minus their percentage of profit.

Can You Cash Out Early?

You can cash out your fractional shares at any time by selling them back to another user through the Masterworks marketplace. Prices for fractional share sales vary depending on demand from other Masterwork users.

Keep in mind though, there is no guarantee that there will be any interested buyers on the secondary market.

  • There is no transaction fee for buying and selling shares through the Secondary market.
  • Shares will be available for transactions 90 days after the closing of the offer.

It’s important to note that Masterwork’s secondary market is only open to U.S. citizens who have a bank account with a U.S.-based bank.

Masterworks Pricing & Fees

Masterworks are generous when it comes to trading fees and are very transparent with their pricing and fee structure.

You won’t be charged fees for the following:

  • Buying initial shares in artwork
  • Selling shares to another investor on the secondary market.

Masterworks charges two sets of fees for the following:

  • A 1.5% annual management fee based on the total value of your account. Deducted from equity annually, diluting your shares. There is no option to pay the fee in cash.
  • Masterworks will profit 20% from the sale of artwork to the open market. These fees contribute to managing artwork, storage, appraisals and insurance, and SEC regulatory fees.

Masterworks Features

Masterworks has several aspects that attract investors. The team is extremely talented, and their determination and experience help the investors earn maximum profit. Below are some highlighted features offered to their investors:

Excellent Art Investment Research

Users are provided with very good research resources on the fine art market and industry including, a contemporary art price database that tracks thousands of pieces of artwork. You can search for specific artists and research going prices for their work.

They also provide users with an abundance of articles and videos teaching a plethora of art investing strategies.

High Potential Industry

Surprisingly, artwork has historically produced higher returns than stocks, bonds, and real estate. The average annual return on art investments over the past 26 years has been 14.1%. By comparison, the S&P 500 has earned 9.9%.

Crème De La Crème

When it comes to securing the big names in fine artworks, Masterworks has it in the bag. They often feature precious art pieces by Basquiat, Picasso, Banksy, and many more 7-8 figure artworks.

Great Customer Support

Great customer service is hard to come by these days. Masterworks offers customer support via phone and email.

You will have the ability to connect with an art specialist where you can discuss your goals, risk tolerance, and everything investing.

Masterworks Performance

Masterworks has purchased more than $200 million worth of paintings since it was founded and average purchases of $1M – $30M every 10 days. They’re easily a top buyer in the space. They hold over $500M+ in securitized paintings.

Because they haven’t been around all that long, Masterworks has only a few exits from their investments. With such limited data, Masterworks still claims that on average you will see a 30% annualized return.

Masterworks has a very successful track record, but there are always risks associated with investing. There is no guarantee that all shares will be tradeable or liquidity through the secondary market.

Remember, fine arts is a highly subjective investment.

Masterworks Strengths

Diversification

Masterworks give the opportunity to diversify assets through investing in pieces of artwork. It has revolutionized the investment world.

Data

Masterworks provides the user with access to their database on the art and fine art markets. You can search for a specific artist and ongoing prices. The platform provides complete information about recent sales and annual investment returns.

Anyone Can Invest

Masterworks is available to anyone to invest and you don’t have to be an accredited investor. The platform was established and designed specifically to help investors.

Masterworks Weakness

Users Design their Own Art Investment Portfolio

Although investors are charged an annual management fee, they still require you to design your own portfolio.

No big deal if you have knowledge of contemporary artwork but, not ideal for the average Joe.

Thankfully, Masterworks experts assess the quality of each piece and only list those that they think have good investment potential. So theoretically, any investment you make should see good returns.

High Tax On Fine Arts

Fine art is taxed as a collectible and a long-term capital gains tax of 28% is applied. Compare that to traditional long-term capital gains being taxed at 20%, the extra 8% can add up.

Masterworks Review Final Thoughts

There’s no doubt Masterworks is an innovative platform that allows you to diversify your investment portfolio. The ability to invest in multi-million dollar artwork is appealing and so is having it all managed for you.

With a valuation of over $1 billion dollars, Masterworks isn’t going anywhere and will be a relatively safe alternative investment.

So, if you’ve been thinking of investing in the art market but don’t have a spare couple of million laying around then Masterworks is the option for you.

Get Started With Masterworks Today

Frequently Asked Questions

Masterworks buys art pieces and their ownership from artists in art galleries and auction houses. They then sell the shares through proper channels and find a buyer for an art piece. After selling it, they transfer ownership.

You need to request an invitation for a phone call interview to become a member of Masterworks.

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Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.