• Features: 5/5
  • Fees: 3/5
  • Ease of Signup: 5/5
  • Secondary Market: 4/5
  • Customer Support: 5/5
  • Customer Satisfaction: 4/5

2022's Masterworks Review: Is It Worth It?

Fact-checked
  • Features: 5/5
  • Fees: 3/5
  • Ease of Signup: 5/5
  • Secondary Market: 4/5
  • Customer Support: 5/5
  • Customer Satisfaction: 4/5

Best For

Everyday investors who want to diversify their portfolio and own shares of art works

STRENGTHS

  • Suitable for non-accredited investors
  • A secondary market aids in the liquidity of the market
  • Easy to use

WEAKNESSES

  • You need to pass a phone interview to start investing
  • High fees

If you’re looking for a new and exciting way to invest your money, look no further than Masterworks! This online art investment platform allows you to purchase shares in some of the world’s most iconic pieces of art.

In this Masterworks review, we’ll take a closer look at what makes this company so unique, and how you can start investing today.

What Is Masterworks?

Masterworks is an online platform that allows you to purchase shares in iconic art pieces. The company was founded in 2017 by Scott Lynn and John Phelan, with the goal of making the art market more accessible to everyone.

Using a crowdsourcing strategy to purchase modern art, the company’s research department assesses up-and-coming modern artists and buys pieces it believes have a strong chance of appreciating in value over time.

After buying a piece of contemporary art, Masterworks submits an SEC filing to offer investors fractional shares in the piece through its platform. Each piece of art must be registered with the SEC for Masterworks to receive eligible investments from accredited and retail investors.

How Does Masterworks Work?

If you aren’t sure how Masterworks work, we’ll explain it in this part of our Masterworks investment review. The platform offers shares to its members for a period of 90 days after the SEC authorizes a file for a specific piece of art. You can choose as many shares as you want to purchase at the listed price, and there’s no minimum investment requirement. The corporation typically charges $20 for fractional shares.

Until it comes upon a suitable opportunity to sell them to collectors on the contemporary art market, Masterworks retains works of art for three to 10 years. Masterworks distributes all revenues from artwork sales to investors who own shares in it, prorated according to the number of shares held, minus its own part of the profits.

The website provides a secondary market if you wish to sell your fractional shares before Masterworks sells an artwork.

Masterworks Features

In this part of our Masterworks art investing review, we’ll take a closer look at the main features of Masterworks.

Art Investment Options

Featuring works from a variety of artists, from the well-known street artist Banksy to historical figures such as Pablo Picasso, Masterworks provides a large range of art investment alternatives.

Masterworks gives investors the chance to purchase artwork created by some of the most well-known artists in the world. But how does the company determine what’s valuable enough to invest in and what will appreciate?

Masterworks Investing Procedure

Let’s take a look at the exact process of Masterworks investing:

  • Masterworks chooses a piece of art its team is considering buying. Masterworks places a strong emphasis on buying works of art from “blue chip” artists, whose works have a track record of increasing in value and maintaining a high auction price—think of artists like Yayoi Kusama, Andy Warhol, and Claude Monet. The artwork is then purchased by Masterworks using its own funds.
  • After assuming the custody of it, Masterworks submits the artwork to the SEC to be registered with the SEC. The SEC filing and offering circular are accessible through the Masterworks profile page for the artwork.
  • As reviews of Masterworks point out, Masterworks provides investors on its platform with the opportunity to purchase “shares” of the artwork after becoming an SEC-registered company.
  • Your artwork is kept secure by Masterworks. The piece of art is then kept by Masterworks in a temperature-controlled gallery of museum quality. Masterworks watches for the piece’s value to rise before actively looking for a buyer who will purchase it at a profit. In return, you pay storage and insurance costs of 1.5% of your entire share amount.
  • You get your money. Masterworks may sell the work to an investor or at auction after three to seven years. You’ll get a piece of the profits, which is calculated based on how many shares you bought.

Minimum Needed to Start Investing

Reviews of Masterworks show investors are satisfied, as there’s no set minimum investment amount at Masterworks. Minimums change based on the particular investment options offered at the time of investment. Nevertheless, fractional shares for artwork frequently start at about $20 per share, making this a great choice for investing with a limited budget.

Usability

Although anyone can invest through Masterworks, users must go through a brief phone interview before they can invest and buy shares of artwork. Investors who want to quickly enter the art market might want to register right away to secure their spot.

Once you enter the site, you’ll surely like its straightforward and efficient layout. Masterworks reviews show users adore Masterworks for a variety of reasons, including:

  • Direct and upfront financing calculator: If you’re solely interested in browsing by works that will undoubtedly receive funding, Masterworks is just what you need.
  • Simple steps for linking banks: After creating your account, you’ll be directed to link your bank account from the Masterworks home page. When you’re ready to start investing, you won’t have any trouble finding the relevant documents or access points, although you can’t link your account and start buying until you’ve finished the required interview.
  • Simple to locate SEC filings: The SEC filing for each artwork is the finest resource for information on Masterworks and its offering requirements. Every work of art currently on the market for investment has a direct link where you can view the SEC filings.

Projected Profits

In this review of Masterworks, we need to point out art investments haven’t traditionally tracked the stock market, which is fortunate, especially given rising inflation and market volatility.

Liquidity

Since it may push you to hold through the ups and downs of investment, illiquidity isn’t always a bad thing. However, since you’re unable to withdraw your money at your discretion, there’s still an implicit cost. To make up for that inconvenience, an investor would ask for a larger rate of return.

As indicated earlier in our review of Masterworks, there’s only an internal secondary market with a little amount of sales volume to sell before each fractional art ownership stake is expected to be retained for 5 to 10 years.

The lack of price discovery is illiquidity’s major issue, as you might own an investment for ten years without knowing what it’s really worth.

When you buy in the S&P 500, you can instantly cash out if you want to and see every day how much your investment is worth.

If you have a lot of artwork in your portfolio, it will be quite tough to predict your retirement plans and determine if you’re on the right track. It will cost you money to get out if a significant expense arises that requires you to pay out early.

Masterworks Education

Masterworks reviews show users are satisfied with the opportunity provided by the platform that enables them to learn more about investing in the art market. Here’s part of what the platform includes in this respect:

Brief bios of each artist: Masterworks makes it simple to discover more about the lives and times of the artists whose works it showcases. Each item even has a separate “Further Reading” section, with resources for learning more about the context of the work being offered for sale.

Masterworks’ exclusive price database: allows you to browse through all the artists and their works while also viewing the sale of thousands of paintings and other artworks.

Masterworks insights: a source for compelling, in-depth, and educational publications. Each item in Insights’ collection offers a fresh perspective while maintaining an easy-to-understand tone. In these articles, you can expect to find deeper explorations of artists’ biographies, the advantages of including art in your investment portfolio, suggestions for buying art on a budget, and many other useful topics.

Secondary Market

What is Masterworks without a secondary market? Investors in Masterworks’ shares can buy and sell on the secondary market—they can sell fractional shares they possess on the open market. Users can browse the classifieds as a buyer and submit a bid.

Additionally, investors can view historical information on items sold on the secondary market.

If they want to get some cash out of their partial ownership before selling a painting, this function is fantastic.

We should note you must be a U.S. citizen with a U.S. bank account in order to buy and sell shares on the Masterworks secondary market, which might prevent foreign investors from using this crucial component of the platform.

Feature Rating
Art Investment Options 5/5
Minimum Needed to Start Investing 5/5
Usability 5/5
Projected Profits  3/5
Liquidity 3/5
Masterworks Education 5/5
Secondary Market 4/5

Ease of Signup

Reviews on Masterworks claim you don’t need to be an accredited investor to start with Masterworks, unlike with certain alternative investment platforms.

However, while you’d think a company that tracks shareholders using Blockchain technology would be forward-thinking enough to allow you to sign up entirely online, you must ask for an invitation and complete a phone interview to join. Although some might find this annoying, you can use the Masterworks interview to discuss your objectives and ask any extra questions you may have.

Risk and Return

In this Masterworks investing review, we need to point out that although there’s no assurance an investment in the art will provide a profit, Masterworks has done fairly well thus far. As of March 31st, 2022, Masterworks has a history of generating an internal rate of return (IRR) of 14.3%, net of fees.

Three investments made by the platform that were exited produced a net realized IRR of above 30%.

Nonetheless, you should always calculate upfront if an investment is a good idea for you!

Fees

The cost of Masterworks is high, as it charges both an annual account fee and a fee based on the sales proceeds of any artwork. The yearly cost is 1.5%, and among other things, this charge includes the costs of storage, security, and insurance.

Reviews on Masterworks point out that the platform deducts a 20% commission from the sales proceeds of each piece of art sold, which is comparable to the cost of investing through a hedge fund. Although that’s quite expensive, if the artwork appreciates significantly, you might still make a respectable profit.

Customer Support

There are now 2 ways to contact Masterworks’ customer support department—you can do so by phone at 203-518-5172 from 9 a.m to 6 p.m. EST, or send an email at support@masterworks.io.

You’ll have a personal representative always available to answer your inquiries, which is another unusual benefit. Unlike with most investment platforms, you have constant access to your own private Masterworks membership representative.

Alternatives

In this part of our Masterworks investment review, we’ll see how Masterworks compares to its main competitors:

Masterworks CrowdStreet  Otis Groundfloor
Win Provides options to hold your investment or sell shares on the secondary market Offers various options, including multifamily, self-storage, and data centers Updates to the app are released on a weekly basis No investor fees
Lose High fees High minimum investment of $25k No control over whether or when Otis sells the underlying assets connected with your shares No liquidity
Best For Everyday investors who want to diversify their portfolio and own shares of iconic works of art Investing in real estate without going through the process of purchasing a property yourself Investors interested in high-value alternative assets without having to purchase the entire investment Passive investors seeking to make money from short-term, low-fee real estate debt investments

Masterworks is a distinctive business that enables you to invest in fractional shares of priceless artwork. Although the idea of buying shares in works of art is attractive, doing so carries some risk, and Masterworks charges hefty commissions. Nevertheless, Masterworks might be a nice place to start for investors wishing to diversify into fine art with a little initial investment.

However, Masterworks is not the best way to invest money in the short term.

Masterworks Review: Conclusion

Masterworks is a platform for alternative investments that offers fractional shares of fine art. The platform makes it reasonably simple for investors to purchase shares of modern artwork by well-known artists like Banksy and Jean-Michel Basquiat at affordable costs, as there’s no minimum investment requirement.

With excellent research and assistance tools and a user-friendly interface, Masterworks is an appealing choice if you’re trying to diversify your portfolio by investing in art without spending a fortune.

FAQ

Has anyone made money from Masterworks?

It may take years before Masterworks sells artwork from its collection, and there’s no assurance the sale will result in a profit. However, according to Masterworks, the modern art market has generated an average annual return of 14.1% over the past 26 years.

Is Masterworks legit?

Masterworks is a reputable alternative investing platform that increases accessibility to blue-chip paintings. However, Masterworks can’t guarantee returns, and this can be a dangerous asset class to invest in.

How do I delete my Masterworks account?

To delete your Masterworks account, you need to contact customer service, and they’ll help you do so.

Is Masterworks art a good investment?

As we mentioned earlier in our Masterworks review, there are many benefits to investing in Masterworks, including the potential for high returns. However, there are also many potential risks, so you need to think twice whether it’s a good choice for you based on your conditions.

ABOUT AUTHOR

Researching various topics started out as a hobby, turned into a passion, and became a profession. Finance, investments, and gambling seemed particularly interesting topics of research, so they became my main focus. Now, I can deliver fresh, relevant content on these topics in my favourite language — English.