Are you looking for alternative investments? Did you know that it's possible to invest in high quality, “blue chip” art, even if you're not a millionaire.
In this post I'm going to be explaining how the unique Masterworks platform works and how anyone can invest (and hopefully profit) from Art.
What is Masterworks?
Masterworks is an investment platform for fine art. Through the platform you can purchase shares in high quality paintings. Here's a good little overview of how it works:
Unlike buying a piece of art buy yourself, Masterworks gives you access to paintings that would usually be way out of your price range. These paintings could be considered less of a risk. They probably have an established base of collectors, as well as name recognition.
Once Masterworks acquires a painting, it is displayed in their private gallery in Soho New York. And it's considered “up for sale”. If a buyer comes a long and offers a high enough price, Masterworks will sell it so share holders in the painting can make a profit.
This document provides a good overview of Art as an investment.
Pros and Cons of Investing in Masterworks
- Access investments traditionally outside of your reach – Before now, investing in blue chip art has been reserved for millionaires and billionaires. Now you can get access to this market.
- Traditionally Good Returns – In the past the type of Art masterworks has invested in has gone up more than 450% since 2000 (based on figures from 2018). The S&P500 went up around 200% in the same period. Remember that past returns are not indicative of future results.
- Pro Storage – You don't need to worry about storing a valuable piece of art on your own.
- Liquidity – This investment isn't liquid. Meaning you can't just sell your shares at anytime. You need to wait until the painting is sold. Masterworks is working on a platform that will allow you to see shares to other people. This would make the investment much more liquid. But at the moment, this is more like investing a bar of gold, or a pair of sneakers.
- Lots a variables – Valuing art is a tricky business. It's impossible to say how much a piece of art will increase in value. There difference between paintings from the same artist can be vast.
Masterworks Minimum Investment
To invest in Masterworks you need at least $1000. I would definitely look at this being a long term investment. So don't invest in Masterworks (or Art in general) if you're looking to make a quick profit over the next 12 months.
The $1000 can be invested across multiple paintings though. So you can diversify your investment. If you invest across multiple paintings, you'll recoup some of your investment (and hopefully make some profits) at different times. It all depends on when the paintings get sold on for a higher price.
There are two fees you need to be aware of if investing in Masterworks. There is an ongoing fee of 1.5% charged annually. This covers the cost of management and storage. Then there is a 20% fee on the profits made from the eventual sale.
My thoughts on Making Money Investing in Art
I really like the idea of investing in art. But I want to invest in Art that I can actually display on my own. I don't think I'll be signing up and using Masterworks. I do think it's possible to make money investing in art. But unless you know what you're doing, going it alone will almost certainly not be profitable. That's why I like the concept of Masterworks. If you have been thinking about investing in Art, then I would definitely give it a look. Its a good way to diversify your investment across multiple pieces and you can get started with as little as $1000. I do like the idea of alternative investments and diversifying beyond stocks.
If you have invested in Masterworks, let me know how you've found it in the comments.