Masterworks Review – How You Can Become an Art Investor

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There's a moment in "Titanic" when Kate Winslet's character, Rose, is hanging paintings from a "new" artist called Picasso. It always struck me as funny that at one time, people didn't know what they had.
But one thing we've come to learn is just how valuable Picasso's work is today. To invest money in artwork seems so foreign and so expensive. Yet, there is an investment platform that is making it easier for regular investors to put their money in high-value art.
In this review, I’ll walk you through the basics of Masterworks.io, which is democratizing art investing for everyone, and explain key features to help you decide if this investment platform is right for you.

What is Masterworks.io?

Masterworks is an investing platform that allows you to own shares of popular and classic works of art. Masterworks offers access to blue-chip (high value) art. With Masterworks, you can become a partial owner of an original Picasso, Andy Warhol, or Claude Monet and start investing in art.
The company was founded in 2017 by Scott Lynn in New York City. Masterworks’ mission is to make blue-chip artwork accessible by everyone, rather than limiting ownership to the rich. Masterworks is currently run by 50+ employees who have 75+ years of art curation experience, collectively.

Why should you invest in art?

Let's start with the basics:
Claude Monet - Masterworks
Source: Masterworks.io
This is an example of price appreciation for Monet's artwork.
Are the returns high? Yes.
Is it out of your price range? No.
Because Masterworks gives you a chance to invest in a fractional share of the artwork much like the new robo-advisor platforms that allow new investors to purchase fractional shares of stock. You don't need big bucks to invest right away.
And, as many in the financial world will tell you, diversification should be a key part of your investing stategy. You don't want all of your funds in one place. Masterworks gives you a new option for your portfolio.
Blue-chip art, as an asset class, has also performed better than the S&P 500 for the last two decades
Masterworks SP
Source: Masterworks.io
That's the beauty of artwork – it gets better with age.

How does Masterworks work?

One of the best perks about Masterworks is that you do not have to be an accredited investor through the SEC (Securities and Exchange Commission) to get started. The only thing you’ll need is to apply a minimum investment of $1,000 (which can be spread across multiple works of art).
To begin the application process, you’ll have to request an invitation to Masterworks (currently on waitlist). If you want to skip the waitlist, use this link provided for Joy Wallet readers.
Masterworks Membership Screen
Once you apply for membership, you’ll receive a number and need to complete a phone interview to finalize your membership. This interview is conducted primarily to verify your identity.
After you become a member, you’ll have access to invest in Masterworks’ art collection. The company's business model uses an advanced algorithm to determine top artists and collections to invest in, with a proven record of appreciation. When the company purchases a work of art, they register it with the SEC and begin issuing shares. Shares can be purchased in increments of $20, but no single investor can own more than 10% of the shares of a single work of art. Investors then make money when Masterworks sells the art piece and divvies up the net proceeds.

How much does Masterworks cost?

Like all investment opportunities, it’s important to understand the fee structure before making a commitment. Masterworks fees are similar to investing with hedge funds.
Masterworks does not charge a signup fee but does require a minimum investment of $1,000. The platform also charges a 1.5% annual management fee for all members, which is used to cover transportation, storage, insurance, and administrative expenses. This can be paid with a debit or credit card.
When a painting appreciates and sells, Masterworks charges a 20% commission on any profit gained. While this percentage is admittedly high, it does indicate that Masterworks seeks to only buy a piece of artwork that is likely to appreciate, as they stand to gain a profit from each sale. Despite the slightly high commission percentage, Masterworks clearly stands by their process and is not in the market of ripping off investors — they only profit if you do.

Masterworks features

  • Specific artwork selection. If you’re a lover of the arts or think traditional investing is a bit dry or uninspiring, Masterworks might offer a much more enjoyable experience. Not only can you invest in a wide selection of classic and highly regarded works of art — you also get to choose the specific artwork you invest in and can become a partial owner of a piece of art.
  • Helpful art sales and research reports. Masterworks provides plenty of data on each selection of artwork, making it easier for you to invest in lucrative art pieces. The company provides auction sales report data for any art pieces that were sent to auction, as well as general global art reports recapping the current state of the art market and new art trends.
  • Protected investments. Masterworks makes sure your investments are secure, safe, and well-preserved, to ensure maximum appreciation at the time of sale. Masterworks keeps all of their artwork in a temperature-controlled, museum-quality art gallery. Your 1.5% annual fee helps cover the cost of your artwork’s preservation and safe-keeping.
  • Investor trading platform. Another key feature Masterworks provides is access to an investors trading platform, where you can buy or sell your shares using the company’s online bulletin board. If you aren’t prepared to wait for Masterworks to sell one of the pieces of art you own shares in, you can trade or sell using this method.
  • Cutting-edge algorithms. It’s in the company’s best interests to ensure your artwork appreciates, which means Masterworks only searches for the top artists and works available through the marketplace. By analyzing buying patterns, new trends, and previous historical appreciation rates, Masterworks is able to bring high performing artwork right to your fingertips.

How to enroll in Masterworks?

There is currently a waitlist to join Masterworks and invest in the artwork they've curated. You can skip the waitlist by requesting an invitation from this link (for Joy Wallet readers).

Pros & Cons

Pros

  • Low share prices. Masterworks makes it easy to invest in blue-chip works of art at a low price. Fractional shares start at just $20 and go up in price in increments of $20. While you’ll need at least $1,000 to get started, this low buy-in price makes it easy to spread your money across multiple high-value works of art.
  • Easy to use platform. One thing I love about Masterworks is how easy it is to use their platform. Purchasing shares of art can be done with a click. The company also provides detailed information about each work of art and artist, so you’re able to quickly and efficiently research your investments prior to buying them.
  • Art outperforms the S&P 500. One great reason to invest in art is that it’s typically recession-proof. In fact, according to the ArtPrice 100 blue-chip art has outperformed the S&P 500 by over 250% over the past 15+ years. Since blue-chip art is also typically purchased by the wealthy, it tends to not be affected by market conditions.

Cons

  • High commission. On the downside, Masterworks does charge a 20% commission on any profit you earn after a work of art sells. Unless you have a good understanding of the art world, it’s unlikely you’ll invest in a diverse number of top-performing artwork, which means your profit margin (after fees) could be lower than it would be when investing in the traditional stock market. If your artwork investments perform like blue-chip art has since 2000, the juice may be worth the squeeze and the commissions are more digestible.
  • Low liquidity. Masterworks anticipates selling a painting within 5 to 10 years through the marketplace, meaning your investment funds could be tied up with this platform for a decade or longer. While you can sell shares through their online bulletin board, this function is still quite new, so there’s no guarantee you’ll find interested buyers there.

Masterworks vs. Competitors

CompanyMasterworksArthenaOtis
Accredited Investor Requirement?NoYesNo
Signup requirement$1,000 investment$200,000 annual salary or $1 million+ net worthApp download
Registered with the SEC?YesYesYes
Fees1.5% annually; 20% commission on profitsNot disclosed (vary by artwork)1% fee on invested capital; 0-10% sourcing fee; 10% commission fee on profits

Accredited investor requirements

Both Masterworks and competitor Otis allow anyone to begin investing in artwork on their platform, regardless of their investor status. Arthena, however, caters to more seasoned investors and requires accreditation and high net worth to sign up.

Signup Requirements

Otis has the simplest requirements of all of the art crowdfunding platforms — simply download the app to get started. Masterworks also allows you to sign up online, though you must complete a phone interview to secure your membership and have $1,000 to invest. Arthena requires an annual salary of $200,000 or more or a net worth of $1 million or more.

SEC Registered

All three art investment platforms are registered with the SEC.

Fees

Masterworks has a simple fee structure, charging 1.5% annually and 20% on all profits earned by artwork sold. Otis has a few additional fees, including a 1% fee on any invested capital, a 0% - 10% sourcing fee depending on the artwork, and a 10% commission fee on profits. Arthena does not list its prices online, but fees vary by investor and artwork.

FAQs

Is investing in art a good idea?

Blue-chip art tends to outperform the traditional stock market, making it a great investment option, if you have a background in art collection.

How many shares can I buy with Masterworks?

Masterworks issues shares of its artwork in increments of $20. While you’ll have to invest $1,000 initially, you can spread this money across numerous artwork. Though there is no limit to how many pieces you can purchase shares of, you cannot own more than 10% in shares for any one work of art.

How does Masterworks choose its paintings?

Masterworks’ investing platform uses an algorithm designed to analyze fine art trends and data to select blue-chip works of art expected to appreciate over the next decade. All artwork is purchased by Masterworks’ in-house team of expert art collectors and curators from major galleries and auction houses.

Is it risky to invest with Masterworks?

Any investment is risky. Masterworks takes precautions when choosing artwork and looks for pieces that will appreciate quickly over 5 to 10 years. Masterworks collects a commission only when you gain a profit, so the company is empowered to find valuable artwork.
Of course, paintings could depreciate over this investment period, which would lead to a loss or diminishing returns.

The bottom line

Masterworks is an inventive crowdfunding platform designed to help anyone interested in art begin to invest in shares of some of the most influential and valuable masterpieces in the world. The Masterworks platform is easy and relatively affordable, but I would only recommend this software to those with a solid understanding of art who are looking for portfolio diversification.

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Disclaimer: Joy Wallet is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance. Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. All figures are provided by the cited source or the service provider. Our partners cannot pay us to guarantee favorable reviews of their products or services.
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