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$0 (share price varies per offering)
1.5%/year plus 20% of profit
$0 (share price varies per offering)
1.5%/year plus 20% of profit
- No minimum to begin (minimum share price varies per offering)
- Masterworks vets each offering/handles due diligence process
- Open to both accredited and non-accredited investors
- Platform is easy to navigate
- Extremely illiquid
- Prospective members have to participate in phone interview to join platform
- Holding periods can range from 3-10 years
- No mobile app for Androids
Is Masterworks right for you?
Masterworks is an online investment platform offering blue-chip art investments that you can either hold onto or purchase and resell. Unlike traditional investments such as stocks and ETFs, Masterworks’ key asset class is fine art, which falls under the category of “alternative investments.”
Founded in 2017, Masterworks currently has more than 400,000 registered users, with 100+ total art pieces and at least $400 million in securitized paintings.
Masterworks vs. Yieldstreet
Masterworks should be the go-to for art-focused investors who have a lot of time on their hands (its minimum holding period ranges from 3-10 years).
Overall, Yieldstreet has lower fees, and it offers a wider range of alternative investments (i.e., multi-asset class funds, short-term notes and debt securities, and more). Plus, it lets you purchase fractional shares in physical art pieces, and you can invest in artwork-backed loans that offer monthly income. Unlike Masterworks, it offers a much more limited selection of artwork (only six offerings), and you’ll need a higher minimum to get started $10,000. Both platforms offer blue-chip pieces (those from top performing artists).
Masterworks vs. Republic
Masterworks and Republic are very different platforms when it comes to specific investment choices, but both provide assets that classify as alternative investments. Masterworks is best for long-term focused investors who have an appreciation for art, while Republic best suits those who want to invest in up-and-coming startups.
Though Republic doesn’t specifically provide art investments, you can still use its platform to invest in startups that specialize in art.
Ways to invest with Masterworks
Here’s how it works: Masterworks’ research team uses proprietary data to pinpoint the best artist markets. Its team then finds art pieces and purchases them. Once purchased, Masterworks collaborates with the SEC to get the art pieces securitized (this allows anyone to buy shares of the works). In other words, it converts artwork into securities that anyone can purchase.
Following this stage, the platform gives all members two options: (a) wait until the all shares within the art/opportunity sell (Masterworks typically holds the artwork for 3-10 years), or (b) sell your shares on the secondary market. Note that you’ll have to wait for either option. Even if you decide to resell your shares, you can only do so at least 90 days after the offering has closed and all shares are sold.
The platform’s secondary offerings are currently limited to US investors with US bank accounts, but those who qualify won’t have to worry about transaction fees for buying and selling shares. In addition, secondary market opportunities typically have lower minimum requirements than primary market offerings.
Risks to consider
There are several risks associated with using the Masterworks. The platform outlines these in its disclosures:
- Unproven business model: Many of Masterworks’ features are untested. In other words, success isn’t guaranteed. The platform says it may have to auction off artwork if its business model ever fails.
- Issuers are undiversified: Investments with single-asset issuers can be risky since you’re investing in a single piece of art. In addition, issuers that offer investments in a collection of different art pieces may still only offer limited access to that particular art market, according to Masterworks.
- Illiquidity: Masterworks issuers typically hold paintings for 3-10 years. However, there’s still a possibility that investors won’t be able to liquidate their shares after the holding period, and there isn’t a guarantee that all shares will ever be tradable.
- Potential Masterworks conflicts of interest: Masterworks doesn’t have a fiduciary duty, and its interests (plus that of its Board of Managers) may not always align with client interests.
- Ability to trade shares: The platform says there isn’t an active public market for those who want to actively exchange their art shares. Masterworks also says such a market may never exist and that those using the resale secondary market might either pay excessive fees to resell shares, or may not be able to resell at all.
You can find more information on the risks of investing through Masterworks here.
Masterworks: Is it trustworthy?
The Better Business Bureau gives Masterworks an NR (“No rating”). BBB ratings typically range from A+ to F, but the bureau says it doesn’t have enough information on Masterworks to issue a rating for the platform.
Ratings reflect the bureau’s opinion of how well companies interact with customers, but the ratings also take into account things like type of business, time in business, advertising issues, customer complaint history, and licensing and government actions.
But it’s nonetheless important to do your own due diligence before settling on an investment platform. The bureau’s ratings don’t guarantee performance or reliability.
Masterworks’ record is clear of any major lawsuits or scandals, and its profile shows it has zero complaints filed against it at this time.
Masterworks — Frequently asked questions (FAQ)
What is the minimum to invest in Masterworks?
There isn’t a minimum investment to use Masterworks, but share price minimums will vary per offering.
How do you sell art on Masterworks?
To sell shares you’ve purchased on Masterworks, you’ll need to first join its Secondary Market. You can do so by clicking “create wallet” in the Secondary Market section of its platform (note that Masterworks currently only offers this service to US investors).
In addition, you’ll only be able to sell your art shares after 90 days have passed since the offering’s final closing date. Plus, Masterworks has a minimum sell order requirement of five shares.
Is Masterworks a legitimate investment?
Yes. All of Masterwork’s art offerings have been filed with the SEC, and the platform has been in business since 2017. However, prospective investors should note that the company isn’t registered or licensed by the SEC, Financial Industry Regulatory Authority (FINRA), or any other regulatory authorities.
The platform says that certain equity owners act as principals to its art transactions in alignment with SEC Rule 3a4-1.