A Review of Masterworks.io
Updated: Jun 24, 2021
This is a freelance lifestyle blog, and most of us don’t have enough money to buy blue-chip art as an investment. However, Masterworks.io is doing an excellent job of democratizing art investment. If Robinhood is how retail investors break into the stock market, Masterworks.io is how we get into the art scene. Here are some pros and cons to help you determine if this is the right alternative investment strategy for you.
Invest in blue-chip art without being a millionaire: Offerings currently start at $20/share making the art world accessible to everyone. You may not be able to afford a Monet or a Banksy, but almost anyone can afford to buy five or ten shares of one.
An alternative asset: Investing in art provides you with a way to see gains even when the stock market, commodities, or crypto market struggle. According to Masterworks’ research, the art market has outperformed oil, gold, and real estate over the last 20 years.
The secondary market: Art is a long-term investment, but for U.S. investors, Masterworks offers a way to get out of your investment early (perhaps even at a profit). The secondary market allows sellers to make their shares available at the price they choose. Alternatively, you could peruse the buyers’ offers to find a price you are willing to sell at in order to ensure rapid liquidity.
No transaction fees: Just as popular stock brokerage apps like WeBull do not charge a trading fee, there are currently no trading fees at Masterworks.
The interview: You can’t just start investing on Masterworks, even though you can set up an account. You have to schedule a consultation, wherein a salesperson will try to explain to you just how good of an investment art is. It feels like a hard sell, and it is because you can’t just buy one share to start. Don’t expect to start with less than $500 (and that will take some haggling).
The fees: Let me start by saying I believe these fees are fair. However, some may find them excessive, so I listed them in the cons section. First, Masterworks takes 20% of the profit when an artwork sells. Then they take a 1.5% fee for each year, which covers storage, insurance, appraisals, regulatory filings, and administrative costs.
The Liquidity: Again, I don’t feel like this is a huge issue. Masterworks is very clear that you should expect to be investing for three to ten years on each artwork. However, if you need to get out of an investment quickly, you may have to sell at a loss in the secondary market (or at least not as much of a gain as you would have preferred).
Tax Complications: Masterworks sets up each artwork as an LLC. Therefore, you need to either wait to receive a K-1 to file your taxes or you will have to amend them. Because of the rules regarding the issuance of K-1s, you may need to file an extension if you want to avoid amending your taxes because the document will often be received after your filing date.
Is Masterworks.io the Right Choice for You?
I’m not a professional investor or any sort of investment advisor, so you will have to make your own decision about the best way to save for your future. If you are looking for a long-term investment with a high rate of return for moderate risk, this is a good option for you. On the other hand, if liquidity issues and tax complications scare you off, you may want to stick to liquid alternatives like exchange traded funds (ETFs) that provide exposure to commodities and other alternative investments.
Remember that regardless of where you choose to invest your money, you should never invest more than you can afford to lose. The Robinhood and WeBull links in this article offer me compensation for referrals. The Masterworks.io links do not.