Masterworks Review: Is This Art Investment Platform a Scam or Legit?
Saving money on masterworks review this art does not have to be complicated. We rounded up the essentials so you can spend less and skip the guesswork.
Key Takeaways
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- Fine art has long been a popular alternative asset class among the ultra-wealthy, but the capital required to buy paintings (which often cos...
Fine art has long been a popular alternative asset class among the ultra-wealthy, but the capital required to purchase paintings (which frequently cost in the millions) , not to mention the knowledge of which ones to purchase and how to properly care for them , makes it unrealistic for most people.
Masterworks aims to solve that problem by offering ownership shares in blue-chip paintings, thus giving average investors a potentially enticing way to diversify their portfolio.
This Masterworks review will help you decide if the platform is a good idea in your situation. We’ll explain the details of how it works, break down the fees, and compare the pros and cons.
If you’re already familiar with how the platform works, you can skip to my analysis, which details why I chose not to invest.
3.6/5Masterworks provides fractionalized fine art investment opportunities. The company lets non-accredited investors purchase ownership shares in blue-chip paintings, charging a 1.5% annual management fee and a 20% fee on all profits. Most Masterworks’ paintings are held for 3 to 10 years, and there's an option to try and sell your shares on a secondary market if you want to liquidate prior to a sale. Due to a high fee structure and risks with investing in individual works of art, Masterworks isn't an ideal alternative investment to construct a balanced portfolio. Instead, it's an option for art-loving investors who already have a well-diversified portfolio and who are interested in learning about art investing with limited initial exposure.
Pros:- Handles the entire process of buying, storing and selling art.
- Open to non-accredited investors with low investment minimums.
- Masterworks’ returns since inception, based on internal appraisals (minus fees), have slightly outpaced the S&P 500.
- Masterworks is a new company with a limited track record.
- Liquidity on the secondary market isn't guaranteed.
- There’s an interview and application process required to access the platform.
Table of Contents
ToggleMasterworks at a Glance
Masterworks is an online art investing platform founded in 2017 by Scott Lynn, who created the company after realizing that the long-term growth opportunities offered by fine art were inaccessible to most investors.
If you learned about Masterworks through an advertisement, there’s a good chance you’ve seen or heard the company compare contemporary art returns to the S&P 500. We’ll touch on that in greater detail later in the article. However, it’s key to note from the outset that art indices tracking returns prior to 1995 do not show such strong performance.
The chart below is the one Masterworks highlights to demonstrate potential returns:
Masterworks uses contemporary art prices from 1995 to 2021 to illustrate the overall potential of art as an investment.Unlike traditional art investing , which requires you to travel to auction houses to find and purchase famous paintings , Masterworks lets eligible investors purchase shares of blue chip art (defined as art that costs $500,000 or more) online.
The idea is that this kind of fractional ownership makes investing in art more practical for people who can’t afford to purchase and store paintings worth millions of dollars.
The Masterworks Investment Process
Buying and selling blue chip art can be more complex than investing in individual stocks. In this section, we’ll discuss the Masterworks investment process, from account creation to generating returns on your assets.
Creating a Masterworks Account
The Masterworks platform is open to non-accredited investors in the United States.
Masterworks requires prospective investors to fill out an application and “request an invitation” to the platform. While they mention a waitlist to join the platform, going directly to their homepage from a browser tab (at the time of publication) allows you to “skip the waitlist.”
After your application is submitted, Masterworks’ customer service team conducts a phone interview with you, during which you’ll talk to the company about your investing goals and how the art investing process works.
When discussing changes to your portfolio with another person, we suggest always working with a fiduciary , i.e., someone legally or ethically required to act in your best interest. Masterworks’ advisers are not fiduciaries, which can create a conflict of interest.
As such, if you’re considering investing with Masterworks, it’s essential to understand where fine art fits into your financial plan before the phone call.
That said, you do get access to view the offerings available on the platform prior to the interview, as shown in the example below.
You’re able to see which paintings Masterworks has available for investment (including the ones above by Pablo Picasso and Mark Rothko) immediately after signing up.After the interview, if the company thinks you’re a good fit for art investing, they’ll help you open your Masterworks account so you can start buying shares of blue chip artwork.
Masterworks does not provide information about how they determine fitness for the platform. However, there are reports that higher net worth investors are encouraged to make larger investments.
Searching for Investment-Grade Art Opportunities
All of the art available on Masterworks is hand-selected by the firm’s researchers based on its potential long-term value. If the Masterworks team thinks a piece of fine art could be a good investment, it acquires that work from an auction or gallery sale.
According to the company, less than 2.2% of artwork that gets reviewed passes this analysis process.
When Masterworks purchases art pieces, it files an offering circular (a type of prospectus) with the Securities and Exchange Commission (SEC). This SEC filing lets Master
Final Thoughts
The bottom line: a little research on masterworks review this art goes a long way. Compare your options, watch for seasonal offers, and never pay full price when a better deal is one click away.
Originally published at thewaystowealth.com.
R.J. Weiss
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