Have you ever dreamed of having an original Andy Warhol or Claude Monet painting hanging in your entryway? Unless you have millions of dollars lying around, a print will have to suffice. But that doesn’t mean you can’t learn how to invest in fine art, an alternative asset that has historically outperformed the S&P 500 by 250%, based on ArtPrice 100 data from over 6,300 auction houses.
With the art investment platform Masterworks, you can invest in shares of famous paintings, just as you would purchase shares in a company. When Masterworks sells the painting down the road, the profits are distributed to shareholders. You don’t need a high net worth to own an iconic piece of art; you can start investing with as little as $1,000. To find out whether art investing is the right move for you, read our complete Masterworks review.
What is Masterworks io?
New York City-based Masterworks was founded in 2017 by Scott Lynn, Alberto Simon, and Hai Minh Tran, and it is the first investing platform of its kind. Collectively, Masterworks’ 17 employees have more than 75 years of combined experience in art collecting. Masterworks is a legitimate company registered with the U.S. Securities and Exchange Commission. It has a unique business model and it's dedicated to acquiring only the best pieces of art from top 100 artists that have historically appreciated in value.
How does Masterworks work?
Masterworks selects paintings from top-performing artists, using historical data to choose the works with the best potential return. Once they purchase a piece, they file an offering circular with the SEC, which allows investors to invest money in that particular piece. Investors can then purchase shares of high-value paintings at $20 each, with a minimum investment of $1,000.
The paintings are typically held by Masterworks for three to five years while they hopefully appreciate in value. They remain in a SoHo gallery, where investors can view them, until they are sold to a private collector. Once a painting is sold, the net proceeds are divided among investors. Masterworks charges a 1.5% annual management fee and takes 20% of any earnings from your investment.
Masterworks also provides investors with the option to sell their shares on the secondary market, if they prefer. This can be helpful if you are concerned about liquidity and having your money invested for three to five years.
Who can invest with Masterworks?
Anyone who is 18 years of age or older and has at least $1,000 to invest can easily get started with Masterworks. You do not need to be an accredited investor to get started. It’s a great option for people who want to diversify their investment portfolios with alternative assets, especially people who want to be involved in the art world. However, keep in mind that returns are not guaranteed, and it is possible to lose money on your investment. Therefore, you should only invest as much as you can afford to lose.
How much can you earn with Masterworks?
Historical data shows that not only have art prices increased alongside inflation, but art investments have seen greater annual returns than traditional equities and bonds during certain periods of time. Some works of art appreciate faster than others, which is why the team at Masterworks carefully selects pieces expected to sell at a significant return.
Masterworks typically keeps paintings for three to five years to allow them to appreciate. Although appreciation rates vary, the results can sometimes be impressive. You can research which artists’ works have historically performed the best on the Masterworks website. In just five years, a Monet painting sold for 2.25 times its purchase price, and an Andy Warhol painting appreciated 4.82 times in the same amount of time. Of course, some art collectors earn even greater returns by holding onto a work of art for longer. A Joan Mitchell painting sold for 137.5 times its purchase price after 30 years.
Maximizing your earnings with Masterworks
The best way to maximize your return with Masterworks is to choose the paintings you invest in wisely. Spend some time researching the art world before you get started. Masterworks plans to introduce new paintings about every two months, so watch carefully for works that you expect to appreciate in value. You also may want to diversify your investment by purchasing shares of several different paintings.
Common questions about Masterworks
Is Masterworks a good investment?
Alternative investments, especially the art market, can be risky. Plus, art is a relatively illiquid asset that requires a long-term investment. While it can be a good option for portfolio diversification if you understand what to expect, experts recommend allocating no more than 10% of your portfolio towards these assets. That said, investing in a work of art could provide greater returns than traditional stocks or bonds. Blue-chip artwork, painted by the top 100 artists, outperformed the S&P 500 by more than 250% between 2000 and 2018. It was also more resistant to declining in value during the recession. However, it's important to remember that historical appreciation rates are not a guarantee of future success.
Masterworks isn’t the right investment for everyone. If you're just learning how to invest money, a traditional brokerage account or robo advisor could be a better option. It’s best for art connoisseurs who already have money invested in more traditional assets and can afford to take on the risk.
How is art valued?
The value of a piece of artwork is mostly determined by the demand for that piece. Works by coveted artists are more likely to appreciate quickly. Other factors influencing the value of a painting include the historical or cultural significance and the physical condition of the piece.
Are numbered prints worth anything?
Limited edition prints by famous artists can end up selling for high prices at auction houses. The fewer prints available, the higher the price tag on each one. And prints that are original will sell for more than reproductions. One Toulouse-Lautrec lithograph, for example, sold for more than $12 million.
How to invest with Masterworks
To get started investing with the Masterworks platform, you’ll need to request an invitation. Just enter your name, email address, phone number, and a password to apply.
Once Masterworks receives your application, they’ll contact you to help you complete the sign-up process. This will require a membership phone interview, during which you’ll discuss the asset class and the risks (along with the potential returns) of investing with Masterworks.
Other investment vehicles to consider
Masterworks may not be the best choice for you. Maybe fine art isn’t your cup of tea, or you may not be able to make a $1,000 minimum investment just yet. Luckily, there are plenty of other investment opportunities out there.
Stash allows you to invest in fractional shares with as little as $1 and leaves all the decisions to you. Betterment lets you open an investment account with no minimum and offers automatic trading and rebalancing. Wealthfront is another investment option with a $500 minimum that also provides automatic rebalancing. Or, if you'd prefer to invest in real estate instead of the stock market, a real estate crowdfunding platform like DiversyFund could work for you.
Or, if you’re not ready to take on as much risk, you could stash your money in a high-yield savings account for now. Know that you have plenty of options, and you’re making a smart choice by setting aside money for the future. Decide what’s most important to you, and you’ll likely find an investment or savings platform that is a perfect match for your needs.