According to The Wall Street Journal, the fine art market has seen an average 10.6% annual return. With Masterworks, you can start with a minimum investment of as little as $20. They offer a secondary market to buy or sell shares before a piece of art is sold.
Masterworks is the first art investing platform to allow you to invest in fine art. Their expert team sources the best art from around the world—everything from Jean-Michel Basquiat and Claude Monet. Whether you’re interested in contemporary artists like Banksy or classics like Monet, they have options.
Of course, art investments also come with risks like lack of regulation, high transaction annual management fees, and subjective valuations. But with Masterworks’ expert guidance and analysis, they aim to minimize risks while maximizing rewards.
For art enthusiasts or individual investors seeking portfolio diversity, Masterworks offers an intriguing new investment opportunity. Here is a detailed Masterworks review to detail what it has to offer.
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The Pros of Investing in Masterworks
Investing in art through Masterworks has some attractive benefits.
Masterworks allow you to diversify your assets by investing in shares of high-value pieces of art. Rather than putting all your eggs in the stock market basket, you can allocate a portion of your portfolio to this alternative investment. Artwork has little correlation with the stock market, so it can help reduce overall risk.
Access to Data
Masterworks provides access to their database on the art and fine art markets. You can explore details on specific artists, prices of recent sales, and annual returns. With this information at your fingertips, you can make informed investment decisions.
Open to All
Unlike many alternative investments, Masterworks is open to all investors, not just the wealthy. They designed the platform so that art investing is accessible to people from all walks of life, from high-net-worth individuals to everyday investors.
The Cons of Investing in Masterworks
As with any investment, Masterworks has some downsides to consider before diving in. Here are a few of the major cons to keep in mind:
Fine art is taxed as a collectible, meaning you’ll pay a long-term capital gains tax rate of 28% on any profits. Compare that to traditional long-term capital gains tax rates of 20%—the extra 8% can really add up over time and cut into your returns. If tax efficiency is a top concern, Masterworks may not be the best choice.
Masterworks only offers shares in a select group of pieces, so choice is limited. If they don’t have any works available from famous artists you’re interested in, you’re out of luck. The selection may improve over time, but for now, it’s still quite narrow.
Who Is Masterworks Best For?
Masterworks is best suited for average investors seeking unconventional assets to diversify their portfolios. Whether you’re eager to venture into alternative markets or want inflation protection for your broader investments, Masterworks offers an appealing choice.
For Inflation Hedging
Contemporary art pieces have a history of strong returns, often beating stocks, bonds, and real estate. Top artists’ works have skyrocketed in value, potentially offsetting inflation over the long run. While Masterworks doesn’t provide regular income like dividends, its potential for significant capital appreciation may balance your investment portfolio.
For Portfolio Diversification
Masterworks provides access to the art market for those reluctant to buy and trade art pieces directly. It allows you to incorporate art into your investment mix without the demands of purchasing, maintaining, and reselling physical works.
Not for Regular Income
It’s important to note Masterworks doesn’t offer income streams, as it doesn’t distribute dividends. And despite having a secondary market for U.S. participants, liquidity isn’t guaranteed.
Potential for Strong Returns
While Masterworks could generate returns surpassing traditional markets, that outcome isn’t assured. Contemporary artwork is an alternative asset, so values can be volatile. But for art investors seeking diversification and inflation protection, Masterworks provides an appealing choice to enhance returns over the long run.
Our Final Verdict: Is Masterworks Worth It?
So, after reviewing the pros and cons, the big question is: Is Masterworks worth investing in? Our verdict is yes, Masterworks can absolutely be worth it for the right investor.Masterworks offers a unique way to diversify your portfolio with an alternative asset class that has the potential for solid returns.
The ability to invest in high-value artworks that were previously only available to ultra-high-net-worth individuals is appealing. Masterworks thoroughly vets and curates the artworks and then actively manages everything for you—they handle the acquisition, insurance, storage, and sale. All you have to do is review the offerings circular and choose what to invest in.
With that said, art is an illiquid investment, and your money could be tied up for 3-10 years or more. There is also inherent risk, as the value of art can fluctuate significantly based on the art market and economy. However, with a valuation of over $1 billion, Masterworks is an established company and in a good position to weather market ups and downs.
If the pros outweigh the cons for your initial investment needs and risk tolerance, then yes—Masterworks can absolutely be worth it. But go in with realistic expectations about the illiquidity and volatility. For the opportunity to diversify into this exclusive asset class, Masterworks is an option worth exploring. Click here to get started with Masterworks today.
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