Thanks to companies such as Robinhood or eToro, investing in stocks, currencies, or commodities is open to the general public. Open an account, and you can buy your first shares in a few minutes. However, this did not apply to investing in art for a long time. It decided to change New York’s start-up Masterworks art investing, about which is this review. If you wanted to buy a painting as an investment before, you had to prepare to pay at least a thousand dollars. The creation of a balanced portfolio was at least in the millions. But now it is possible from twenty thousand.
Masterworks art investing review
Masterworks analysts are the first to select interesting works for investment. It focuses on the so-called “blue chip” masterpiece by artists who have been growing in value for a long time and are being sold at high prices at auctions. The investments in these creations are the least accessible to ordinary people.
They also monitor which artistic trends currently attract the most investors. For example, the prices of paintings from the second half of the 20th century are rising several times faster than the paintings of old artists such as Rembrandt. After Masterworks analysts find exciting artwork, the company buys it for equity. It then obtains permission from the SEC to sell investors a stake in that artwork.
While the piece is stored in a safe place for several years, investors can sell and buy its shares on the secondary market, and Masterworks tries to find buyers for it. After the sale of the work, each investor will receive their share of earnings. If Masterworks fails to find a buyer willing to buy the job at an acceptable price within 3 to 10 years, the work will be auctioned.
Why use Masterworks?
There are several reasons why a Masterworks offering can be attractive for investment. The first is that it allows people to create a portfolio of works of art with a low level of risk without the need to invest a large amount of financial capital. They are often the most expensive artists, such as the French painter Oscar-Claude Monet, for whom it is easiest to predict the future development of the award.
Another great benefit is that it allows people to invest purely online. It can be an inefficient time for many people to go to a gallery or auction and pick a work to buy, especially if they don’t know much about art yet. With Masterworks, you can solve everything through a simple web application. In addition, you can only choose from a limited selection of works that analysts have identified as a good investment opportunity. Buying shares of a job also allows you to sell only part of your investment if necessary, not necessarily the entire work. You don’t have to deal with the problems associated with storing and insuring an expensive piece of art.
Of course, several problems are associated with buying artwork shares instead of buying the creation itself. First, entering the Masterworks platform is still not as easy as registering at eToro, as a quick telephone interview is required. However, one has to wait for that for a while. In addition, investing in art is still not as affordable as investing in stocks because Masterworks requires a minimum investment of thousands of dollars (but you can spread that among several works of art). That is why Masterworks art investing needs a review to decide, if you want to buy.
Fees are also a significant disadvantage. The first is an annual 1.5% fee, covering transport, storage, insurance, and administrative expenses associated with the art trade. The second is the 20% fee that Masterworks deducts from the profit after the sale of the artwork. This is a factor that can significantly affect whether it is more advantageous for a person to invest through Masterworks or instead.
At the very least, this shows that it is also in their interest to purchase only works that will be valued. It is also important to note that you can buy a maximum of 10% of one artwork this way, which may discourage some investors, as well as the fact that a piece purchased in this way is not exhibited anywhere and is probably never even physically seen.
Why invest in art?
There are several reasons why investing in art can be interesting. According to the Art Price Index 100, blue-chip artworks have grown 250% more than the S&P 500 over the past 15 years. Investing in art can also be an excellent opportunity to diversify your investment portfolio, as art prices have a very low correlation with stock prices and other assets.
However, care must be taken, as art is a highly illiquid asset that sometimes needs to be held for several years before a buyer can be found. This is partly the case with Masterworks. Their secondary market is still tiny compared to the stock market. They are also waiting for several years to sell the entire work.