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.
With the art investment platform Masterworks, you can invest in shares of famous paintings, which is similar to purchasing shares in a company. When Masterworks sells the painting down the road, the profits are distributed to shareholders of that painting. You don’t need a high net worth to own part of an iconic piece of art. To find out whether art investing is the right move for you, read our complete Masterworks review.
Invest in paintings by Monet, Warhol, and Banksy.
- Invest in art like a millionaire for a relatively low cost
- Buy shares of fine art
- Over 605,000 members and counting
What is Masterworks?
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’ art experts 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 the top 100 artists that have historically appreciated in value.
|Management fees||1.5% annual management fee, 20% of any future profits|
|Asset classes||Shares of fine art|
|Best for...||Investors with long-term horizons who want to invest in fine art|
How does Masterworks work?
Masterworks uses historical data to select paintings from top-performing artists with the best potential for 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 per share.
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, a similar fee structure to what you might see with a hedge fund.
Masterworks has a positive track record so far: It’s had 11 exits, and the last three realized 10%, 14%, and 35% net returns. 1 Masterworks also provides art 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 tied up in an investment for three to five years.
Who can invest with Masterworks?
Anyone who is 18 years of age or older 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 help diversify their investment portfolios with alternative assets, especially people who want exposure to 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?
While art might seem like a strange thing to invest in, some historical data gathered by Masterworks shows that art prices have increased alongside inflation. Masterworks' data shows contemporary art prices rose annually 20% on average during high inflationary periods. But keep in mind that some works of art appreciate faster than others, and art prices can be more erratic than some other investments.
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 buy shares of multiple different paintings if possible. Spend some time researching on the website before you get started. Masterworks plans to introduce four new paintings about every week, so watch carefully for offerings that you think could 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?
Like any investment, alternative investments, including those in the art market, can be risky. Plus, art is a relatively illiquid asset that requires a long-term investment, and prices can be erratic. 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 potentially provide good returns. Blue-chip artwork, meaning painted by the top 100 artists, outpaced the S&P 500 by 135.7% between 1995 and 2022. It was also more resistant to declining in value than many traditional assets during the 2008 recession. However, it's important to note that this performance data was collected by Masterworks and historical appreciation rates are not a guarantee of future success.
Masterworks investments aren't right 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 call (less than 10 minutes usually), during which you’ll discuss the asset class, risks, and potential returns of investing with Masterworks.
Other investment vehicles to consider
Masterworks may not be the best choice for you. Maybe Masterworks' fees or fine art, in general, aren't your cup of tea. 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 your personal finance goals. 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.
- Invest in art like a millionaire for a relatively low cost
- Art investments have outperformed the S&P 500 by over 131% for 26 years
- Purchase shares of artwork by top artists
- Hedge against inflation and diversify your portfolio