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#2) Masterworks: Investing In Fine Art

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3-Sentence Summary:

  • Masterworks allows you to invest in high-end artwork.
  • Although past performance is no indicator of future returns, fine art has earned historical annual returns of 13.8%.
  • High-end artwork is also known to perform well during inflationary environments.

How Does It Work?

Masterworks is a platform that allows you to invest in multimillion-dollar paintings. This gives you access to an exclusive asset class that was formerly reserved for millionaires.

After conducting extensive research to identify profitable paintings, Masterworks buys high-profile pieces of art and then securitizes them with the SEC, just like a stock. From there, Masterworks allows investors to buy “shares” in its collections of paintings. 

Over the past 25 years, contemporary art pieces have increased in price by an average of 13.8% annually. Over the same period, the stock market has returned 10.2% while real estate and gold have returned 8.9% and 7.2% respectively.

What’s even more interesting is that art is known to increase in value during inflationary periods, such as the one that we are in right now.

How Much Can I Make?

The returns that Masterworks advertises vary quite a bit depending on the artist and the piece that you’re investing in. Since it has over 100 paintings available on its site, you’ll definitely want to do a little bit more research before investing.

However, here are a few samples of annualized net returns of popular artists:

  1. Banksy: 32%
  2. Claude Monet: 9.2%
  3. George Condo: 39.3%
  4. Sam Gilliam: 33.1%
  5. Joan Mitchell: 17.8%

Masterworks also has extensive pricing research of different artists and pieces, highlighting how much different paintings have sold for throughout history. 

For example, Banky’s “Riot Cop” was purchased for $33,000 and sold for $510,000 13 years later. This is a price appreciation of 15.4X in just 13 years. But, not every painting is a home run. Another one of Banky’s paintings, Mona Lisa, was purchased for $335,000 and sold for $930,000 11 years later. This just a 2.8X return over 11 years.

Getting Started

Right now, you need to apply to join the Masterworks platform. You can request an invitation here

Keep in mind that, if you invest, you’ll need to wait until Masterworks sells the painting after a period of 3-10 years to receive your return. However, they also have a secondary market where you can try to sell your shares before the holding period is over.

Masterworks is a great platform for anyone interested in investing in alternative assets and diversifying their portfolio.

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