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It is well known that the prices of artworks have increased dramatically over the past decade. With these increases in value comes an ever-increasing demand for information on how to invest in fine art. Masterworks is one way to do it. This review will help you decide whether Masterworks is the right fit for your fine art investment.
What is Masterworks?
Masterworks is an online marketplace where art investors can buy and sell fractional shares in works of art. Masterworks offers an easy-to-understand investment product that makes it relatively simple for investors to buy shares in fine art. Moreover, it enables investors to buy shares in popular art at very affordable prices, making it relatively easy for investors to buy shares in modern artworks.
How Masterworks Works?
Masterworks uses a crowdfunding model to buy contemporary art works. The company reviews works of art from promising artists and invests in them through their website. Masterworks will file a registration statement with Securities and Exchange Commission in order to allow investors to buy shares in a particular work of art. Having each art work registered with the Securities and Exchange Commission (SEC) makes them eligible for investment, allowing Masterworks to accept investors who are both retail investors and accredited investors.
Masterworks sells fractional shares to customers within 90 days after receiving the approval of the SEC for a work of art. There is no minimum investment required, and you can buy any number of shares at the price that they list. Masterworks sells shares in works of art that it owns for $20 (which is a pretty good price for a small investment).
Masterworks holds onto the art for as long as possible (usually 3-10 years), in order to allow it to sell it at a reasonable price to accredited investors. Masterworks then distributes the proceeds from the sale of a work of art to those who own shares in the work, based on the number of shares owned and the percentage Masterworks received from the sale of the work.
If you want to sell some of your shares before Masterworks sells a piece of art, the site offers a secondary market that allows you to do that. Users can buy and sell shares by using Masterworks to trade with other customers. However, it is not guaranteed that a buyer will want your shares if you want to sell them. Masterworks customers are buying and selling art all the time, so price differences between customers are extremely dependent on what other Masterworks customers are selling in the secondary market. Masterworks offers its secondary market to U.S. citizens who have a bank account in the United States.
Masterworks charges an annual management fee of 1.5%, based on the value of the shares you own. They take this charge each year as a charge on the value of your shares, which will gradually reduce the number of shares that you own. Masterworks does not allow you to pay cash for the management fee.
They also receive 20% of the profit if Masterworks sells a piece of art. Masterworks charges these fees to cover the extra costs associated with managing art, including storage and insurance, and SEC fees.
Masterworks does not require any transaction fee for buying or selling shares in your company. No one will owe you anything if you bought shares with your initial investment or if you sell them to another investor in the secondary market.
Benefits of Masterworks
Masterworks has developed a very good website that gives users useful information about art and the fine art market. You can search through thousands of art works and see the prices that they are selling for them. You can also research artwork by specific artists and their upcoming sales prices.
It also provides information about each piece of artwork, like when it was last sold and how much it has appreciated. It also provides information about the expected return from investing in the art. Masterworks provides information about investing in fine art and offers educational videos on the topic.
Investors could also benefit from investing in art because it offers them a great way to diversify their portfolios. Fine art markets are not as volatile as the stock market, and because of this, you can receive a good return even when a market declines.
Investing in fine art is usually reserved for the very rich. With the help of Masterworks, small investors can buy shares in great art and make a decent profit from it. It's open to everyone. You don't have to have a lot of money to invest in their services.
Masterworks provides excellent customer service by phone and by email. You can easily talk with one of the platform's specialists about art as part of an initial conversation. They will be able to help you choose the right pieces of artwork to invest in.
Masterworks charges a high management fee, but it's you who decides how much equity to hold in your portfolio. If you don't know a lot about the art market, you may not be able to make the best decisions.
It's unlikely that artwork will generate any interest or dividend payments in the future. You will earn a good return on your investment if someone buys the artwork later and then sells it for a higher price, something that is not guaranteed.
Fine art is taxed as a type of “collectible,” and as such, the long-term capital gains tax rate on art is 28%. It is taxed at a much higher rate than the average long-term capital gains tax rate on investment assets.
If you are not a U.S. citizen and doesn't have a U.S. bank account, you cannot buy or sell shares on the platform’s secondary market. It is very possible that international investors will be blocked from taking advantage of some of Masterworks' key features.
Masterworks is a very good platform for investing in fine art. There are a few drawbacks to the platform, but they are easily overlooked. Masterworks offers a great service that will make it easier for investors to invest in fine art. Try using their service if it seems like a good fit for you.