Investing Brokerages & Advisors

Masterworks Review [2024]: Investing in Artwork May Be Cheaper Than You Think

You don’t need millions to potentially profit from blue-chip art. Masterworks lets you invest in famous paintings.

By Lindsay Frankel

Edited by Gabriela Walsh

Updated April 23, 2024

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Masterworks

OUR VIEW

We recommend Masterworks as an investment platform best suited for investors who want to diversify their portfolios by investing in the fine art market as an alternative asset class.

We like that it provides a relatively simple way to invest in shares of iconic paintings by renowned artists like Monet, Warhol, and Basquiat without needing millions of dollars. If Masterworks sells a painting for a profit, each shareholder gets a portion of this profit.

However, like many alternative assets, investing in art through Masterworks has higher fees compared to stocks or ETFs. Masterworks charges a 1.5% annual management fee and keeps 20% of the profit made after the sale of a painting.

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Pros

Provides access to investing in shares of iconic artworks

Offers portfolio diversification through alternative assets

Has a stringent curation process to select blue-chip art with potential appreciation

Cons

Charges a relatively high 1.5% annual management fee plus 20% of profits

Artworks have an illiquid, long holding period of 3 to 10 years before being sold

How we evaluate products

Key Takeaways

We recommend Masterworks to people who want to access the exclusive world of art investing to increase their portfolio diversification.
We like that Masterworks has a stringent curation process, purchasing only blue-chip artworks by elite artists with historically proven value appreciation.
Masterworks has a hold period of three to 10 years before selling artworks.
We think Masterworks suits long-term investors open to high-risk alternatives, but we recommend diversifying with lower-risk investments for portfolio balance.¹
We don't like the relatively high 1.5% annual management fee plus 20% of profits earned. For lower-cost alternatives, we suggest robo-advisors like Betterment or investing apps like Stash².

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What is Masterworks?

Masterworks is an art investment platform founded in 2017 in New York City by Scott Lynn, Alberto Simon, and Hai Minh Tran. Collectively, Masterworks' team has over 75 years of combined experience in art collecting and investing. The company is registered with the U.S. Securities and Exchange Commission (SEC).

Masterworks uses a unique model with the aim of democratizing art investing. It employs historical data to strategically acquire blue-chip artworks from top artists with artworks that have demonstrated strong appreciation over time.


Minimum investment	Each offering has a stated minimum of $15,000, but lower minimums may be available
Management fees	1.5% annual management fee, 20% of any future profits
Asset classes	Shares of fine art as alternative assets
Best for...	Investors with long-term horizons who want to invest in fine art
	Visit Masterworks

How does Masterworks work?

Masterworks uses historical data to select paintings from top-performing artists with the best potential for return. Once they purchase a piece, they file an offering circular with the SEC, which allows investors to invest money in that particular piece. Investors can then purchase shares of high-value paintings.

The paintings are typically held by Masterworks for three to 10 years while they hopefully appreciate in value. They remain in a SoHo gallery, where investors can view them, until they are sold to a private collector. Once a painting is sold, the net proceeds are divided among investors.

Keep in mind

Masterworks charges a 1.5% annual management fee and takes 20% of any earnings from your investment.

Masterworks has a positive track record so far: It’s had 11 exits, and the last three realized 10%, 14%, and 35% net returns.³ Masterworks also provides art investors with the option to sell their shares on the secondary market if they prefer. This can be helpful if you are concerned about liquidity and having your money tied up in an investment for three to 10 years.

Masterworks

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How to invest with Masterworks

To get started investing with the Masterworks platform, you’ll need to request an invitation. Just enter your name, email address, phone number, and a password to apply.

Once Masterworks receives your application, they’ll contact you to help you complete the sign-up process. This will require a membership call (less than 10 minutes usually), during which you’ll discuss the asset class, risks, and potential returns of investing with Masterworks.

Who can invest with Masterworks?

Anyone who is 18 years of age or older can easily get started with Masterworks. You do not need to be an accredited investor to get started. It’s a great option for people who want to help diversify their investment portfolios with alternative assets, especially people who want exposure to the art world. However, keep in mind that returns are not guaranteed, and it is possible to lose money on your investment. Therefore, you should only invest as much as you can afford to lose.

Please note that Masterworks retains complete discretion to determine that subscribers are qualified purchasers, as defined in Regulation A under the Securities Act.

How much can you earn with Masterworks?

While art might seem like a strange thing to invest in, some historical data gathered by Masterworks shows that art prices have increased alongside inflation. Masterworks' data shows contemporary art prices rose annually 20% on average during high inflationary periods. But keep in mind that some works of art appreciate faster than others, and art prices can be more erratic than some other investments.

I first bought shares in a Basquiat on Masterworks in May 2021. I made a follow-on investment in another Basquiat earlier this year. Masterworks follows a similar appraisal structure for the paintings to a venture fund marking investments in startups. I've got the option to sell the first investment on the secondary market at my own markup. I can use the appraised value with 35% gain as the benchmark bid and compete with other early investors who are looking to sell.

- Reddit user browndroid

Masterworks typically keeps paintings for three to 10 years to allow them to appreciate. Although appreciation rates vary, the results can sometimes be impressive. You can research which artists’ works have historically performed the best on the Masterworks website.

In just five years, a Monet painting sold for 2.25 times its purchase price, and an Andy Warhol painting appreciated 4.82 times in the same amount of time. Of course, some art collectors earn even greater returns by holding onto a work of art for longer. A Joan Mitchell painting sold for 137.5 times its purchase price after 30 years.

Invest in Paintings by Basquiat, Picasso, Banksy

Masterworks Benefits

Invest in art like a millionaire for a relatively low cost
Art investments have outperformed the S&P 500 by over 131% for 26 years
Purchase shares of artwork by top artists
Hedge against inflation and diversify your portfolio

Visit Masterworks

Maximizing your earnings with Masterworks

The best way to maximize your return with Masterworks is to buy shares of multiple different paintings if possible. Spend some time researching on the website before you get started. Masterworks plans to introduce four new paintings about every week, so watch carefully for offerings that you think could appreciate in value. You also may want to diversify your investment by purchasing shares of several different paintings.

Other investment platforms to consider

Masterworks may not be the best choice for you. Maybe Masterworks' fees or fine art, in general, aren't your cup of tea. Luckily, there are plenty of other investment opportunities out there.

Both Betterment and Stash offer more liquid traditional assets compared to Masterworks' three-to-10 year holding periods for artwork.

Stash

Unlike Masterworks, which focuses solely on blue-chip artwork, Stash is an investing app that allows you to buy fractional shares of stocks and ETFs⁴ for as little as $1. This makes it more accessible than Masterworks for people who are new to investment or have limited capital. Stash also has a monthly fee of $3 or $9⁵, depending on your plan. For this fee, you receive investment advice, personal finance guidance, access to automated investing, and more.

Visit Stash | Learn more in our Stash review

4.6

Stash

Get $20 to start investing. Invest in stocks, bonds, ETFs and fractional shares.

Learn how it works >

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Betterment

Betterment is a robo-advisor that builds and automatically manages an investment portfolio for you based on your risk tolerance and investment goals. It has lower fees than Masterworks at 0.25% annually when you set up recurring deposits of $250 or more or have a balance of $20,000 or more. Betterment provides diversification across stocks and bonds, which can lower your risk.

Learn more in our Betterment review

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Masterworks FAQ

Is Masterworks a good investment?

Like any investment, alternative investments, including those in the art market, can be risky. Plus, art is a relatively illiquid asset that requires a long-term investment, and prices can be erratic. While it can be a good option for portfolio diversification if you understand what to expect, experts recommend allocating no more than 10% of your portfolio towards these assets.

That said, investing in a work of art could potentially provide good returns. Blue-chip artwork, meaning painted by the top 100 artists, outpaced the S&P 500 by 135.7% between 1995 and 2022. It was also more resistant to declining in value than many traditional assets during the 2008 recession. However, it's important to note that this performance data was collected by Masterworks and historical appreciation rates are not a guarantee of future success.

Masterworks investments aren't right for everyone. If you're just learning how to invest money, a traditional brokerage account or robo advisor could be a better option. It’s best for art connoisseurs who already have money invested in more traditional assets and can afford to take on the risk.

How is art valued?

The value of a piece of artwork is mostly determined by the demand for that piece. Works by coveted artists are more likely to appreciate quickly. Other factors influencing the value of a painting include the historical or cultural significance and the physical condition of the piece.

Are numbered prints worth anything?

Limited edition prints by famous artists can end up selling for high prices at auction houses. The fewer prints available, the higher the price tag on each one. And prints that are original will sell for more than reproductions. One Toulouse-Lautrec lithograph, for example, sold for more than $12 million.

Masterworks review: bottom line

We recommend Masterworks for those interested in alternative investing and portfolio diversification through blue-chip art. We like the potential for value appreciation from artworks by elite artists like Warhol and Monet.

However, we think that the 1.5% annual management fee plus the 20% share of profits that Masterworks charges are high fees. Plus, there’s an inherent risk in tying up capital for three to 10 years. If you’re after lower costs or more liquidity, you may prefer robo-advisors like Betterment or investing apps like Stash instead.

But for long-term investors comfortable with alternative assets alongside traditional investments, Masterworks provides a simple way to invest in fine art.

FinanceBuzz is not an investment advisor. This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice.

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Provides access to investing in shares of iconic artworks

Offers portfolio diversification through alternative assets

Has a stringent curation process to select blue-chip art with potential appreciation