The Masterworks app offers fractional assets and high-quality artwork for up to $30 million. Its owner, Scott Lyn, is an online entrepreneur and art collector; he launched the site in 2017 and currently has over 650,000 subscribers.
The top Masterworks painters exceed the S&P 500, and adverse times seldom affect art prices. Like many of the best alternative investment applications, Masterworks only accepts artworks that pass its stringent verification process.
Expert traders who are comfortable with contemporary fine art's risk and liquidity are the best masterwork contenders. However, modern fine art is not suited for risk-averse investors seeking high-liquidity assets. Depending on the Masterworks painting you buy, you must keep holdings for three years.
Masterworks Costs
Prices vary depending on shareholding and Masterworks art selection. You can start investing with $15,000 or more. A 1.5% annual administration fee covers insurance, security, and other costs. Moreover, every $20 worth of shares is utilized. In addition, the Masterworks investments app will incur a hefty 20% fee from your sales proceeds. This may be a big reduction since fine art liquidity might be quite low.
Advantages Of Masterworks
Art Investment Research
With its thorough financial data on a wide range of artworks, Masterworks is a leading authority in art investment research. Users may search its vast database using various criteria. To further aid investors in understanding the subtleties of Masterworks painting investment, Masterworks offers instructional materials, including articles and videos. Thanks to these characteristics, investors are better prepared to make wise selections.
Well-Designed Platform
The Masterworks platform's clear and simple interface is intended to be easily used. Users can navigate the website and manage their investments easily. Traders may monitor their portfolios while on the move using the Masterworks Investments mobile app. Overall, this intuitive design makes investing more enjoyable.
High Potential Returns
Fine art has historically produced larger returns than more conventional assets like bonds, equities, and real estate. Investing in art may reduce portfolio risk overall by offering diversification advantages. A larger audience may access priceless art by purchasing fractional shares from Masterworks, which enables investors to capitalize on this possibility for greater profits.
Easily Reachable
Because masterworks enable modest investors to own shares in highly valued artwork, they democratize the art investment market. Through Masterworks, anybody may join, regardless of financial situation, unlike typical art investments that need a substantial amount of funds. By allowing a wider range of investors to participate in the art market, this inclusiveness increases the potential for financial gain.
Good Customer Service
Masterworks Investments app provides good customer service via phone and email. Experts are there to help investors choose artwork that fits their financial objectives and risk tolerance. Moreover, this individualized assistance increases investor confidence in making choices about their investments, guaranteeing that they get professional advice.
Disadvantages Of Masterworks
Design Own Portfolio
Masterworks provides financial information and education, but users must develop their art investment portfolios. For beginners in the Masterworks painting market, this task may feel daunting. Moreover, Masterworks' annual management charge hikes investment costs and may deter purchasers.
Big Investment Risks
Buying fine art is risky. Unlike other assets, artworks seldom generate cash flows. Profiting from the item requires selling it at an undetermined higher price in the future. Masterworks art investment is hazardous and not for careful investors since there are no assurances.
Higher Taxes
Fine art is subject to collectibles tax with a long-term capital gains tax rate of 28%. In the case of traditional assets, this rate exceeds the limit of 20%. This higher tax rate may dramatically lower net profits on art investments for high-net-worth people, making Masterworks painting investments less appealing than other investment vehicles.
Phone Interview Requirement
Prospective investors must have a phone conversation with a firm expert prior to enrolling at Masterworks. For some people, this necessity may be bothersome and uncomfortable. The interview can turn off prospective investors who want a simpler process, as it adds another step to the onboarding procedure.
Limited Secondary Market
United States residents with a U.S. bank account are the only ones eligible to transact in art shares on the Masterworks secondary market. This limitation lessens the platform's appeal to a worldwide audience by making it less accessible to foreign investors. Additionally, it also limits the liquidity alternatives available to non-U.S. investors by preventing them from participating in the secondary market.
Who Is Suitable For Masterworks?
A liquid portfolio worth at least $100,000 is what Masterworks best serves as an investor. One appropriate allocation to alternative assets in this scenario would be a $15,000 investment or around 15% of the portfolio.
A 20% incentive fee on earnings and a 1.5% yearly management charge, which is comparable with other alternative investments like hedge funds but far more than conventional mutual funds, must also be acceptable to such an investor.
The perfect Masterworks investments investor should also already have a well-rounded portfolio of traditional assets, such as cash, bonds, and equities. By introducing noncorrelated returns, fine art via Masterworks could further diversify this mix instead of unduly focusing it on an illiquid, high-risk asset class.
Moreover, considering that the art market is less liquid than more accessible and easily exchange-traded assets like commodities or alternative ETFs, prospective Masterworks investors should also be comfortable with this fact.
Moreover, the investor should also be prepared to take an active role in their investment. A genuine enthusiasm or passion for masterwork art is perhaps necessary, but this is not a "set it and forget it" kind of asset; it calls for some proactive management and a readiness to learn about the art market.
The Bottom Line
Masterworks has no minimum investment amount. At investment time, minimums vary per investment choice. Even if there is potential for improvement, it allows diversification into various investments without seven-figure wealth.
Masterworks investments app is best for those who can lose all or part of their funds. The Masterworks art customers are unpredictable; thus, even a "blue-chip" artist may not make money. If you're looking for alternatives to stocks, Masterworks may be a nice but risky addition.
