What Is Masterworks?
Founded in 2017 by Scott Lynn, Masterworks is an investing platform that offers everyday investors access to an alternative asset class: contemporary art. Contemporary art as an alternative investment has been historically accessible only to the very wealthy who could afford the high entry barrier.
Masterworks provides everyday investors exposure to this growing asset class with low minimum investments ranging from $500 to $15,000, or even less if you speak directly with the reps at Masterworks. Adding art to your portfolio can be very beneficial, as it has a very low correlation with traditional markets and can serve as a hedge during times of uncertainty.
To get started with Masterworks, you need to create an account; Masterworks takes care of researching artist markets, selecting the winners, and listing the pieces available. Masterworks is very flexible in that you can check the full list of offerings at any time – or even check the data they used to select those pieces – and invest in your favorite artist or piece.
In this quick Masterworks summary, I will go over the best features of this platform. For the complete in-depth analysis, check out our full Masterworks review.
Pros & Cons of Masterworks
Pros
- Inflation hedge
- Low minimum investment
- Low correlation with traditional markets
- Low price depreciation compared to other assets
- Available for accredited and non-accredited investors
- Increased liquidity in secondary markets
Cons
- Long-term investment
- Fees (insurance, storage, and other expenses)
How Does Masterworks Work?
Masterworks follow a four-step process to select and acquire fine art pieces. First, they use proprietary data to find the artist markets that have the potential to increase their value. Then, Masterworks’ acquisition team chooses the best piece, always considering the asking price, risk, and many other factors. Masterworks then makes the piece available to all members so they can start purchasing shares and gain exposure to the artist market.
The estimated holding time of each painting is between 3-10 years; usually, this would be very prohibitive in terms of who can afford to invest for such long periods, but unlike most alternative investment platforms out there, Masterworks has a fully functional secondary market where you can sell your shares at any time, provided there is a buyer.
Keep in mind the secondary market is only available for US citizens with US-based bank accounts.
Historical Returns
Contemporary art as an asset class has historically been one of the most stable asset types, with a low correlation to traditional markets and low price depreciation. Additionally, over the last 25 years, contemporary art has consistently outperformed the S&P 500 index and most real estate investments – even during periods of high inflation. If you’re interested in another stable asset, we recommend checking Money Metals, one of the best platforms to purchase precious metals in the US.
As of 2022, Masterworks offers investors exposure to more than 100 paintings. Investors can choose any listed pieces and purchase shares directly from Masterworks or acquire them from the secondary market. In the best-case scenario, you can expect 9%-30% annualized net returns, depending on the artist and how long you hold on to your shares.
Invest In Masterworks With Your IRA Account
Investing with your IRA account in alternative assets is now very easy – thanks to Masterworks’ partnership with Alto IRA. You can now open an account, add funds, and invest in Masterworks without leaving the Alto IRA dashboard. Keep in mind the minimum investment if you want to invest through Alto IRA is $10,000.
The main benefit of using Alto IRA is that you can browse dozens of investment opportunities in the real estate, crypto, collectible, and farmland market, all from one place.
Is Masterworks Legit?
Masterworks is registered with the Securities and Exchange Commission (SEC) and is under Regulation A+ of the securities act of 1933. Masterworks conducts annual appraisals and ensures all their pieces.
Masterworks Fees
- Annual Management Fee: 1.5%/year
- Future Profits Fee: 20% of the final price
Masterworks management fees are in line with other platforms in the investing industry. The 1.5% fee covers insurance, storage, annual appraisals, and administrative costs.
Sign-Up Process
Masterworks mainly targets US investors, but it is available for investors worldwide. Keep in mind that if you’re outside the US, you will need to familiarize yourself with the local laws to make sure you comply with restrictions and regulations.
Masterworks is open to accredited and non-accredited investors, and the sign-up is very easy. You can get started in just a couple of minutes. Here are the steps:
- Visit Masterwork’s website
- Click Get Started
- Fill in some of your basic information
- Make an initial deposit
Make sure to sign up using our promo link, so you don’t miss the welcome bonus. If you use our link, the promo code will be applied automatically at sign-up.
Final Thoughts
Masterworks is an excellent option to gain exposure to the contemporary art market. If you’re a new investor, you can take advantage of Masterworks’ very knowledgeable customer support, who will guide you and answer any questions you may have. Experienced investors can access the proprietary data Masterworks uses to pick their artists and use it to make more informed decisions. Masterworks fees are competitively low, and investing in art is an excellent option if you’re looking to invest in a stable market with high potential and low correlation with traditional markets. Another exciting market worth considering is fine wines, and the best place to get started is Vinovest, a dedicated investment platform for fine wines.
