Have you heard of Masterworks? Can you invest in Masterworks stock? This company is unique. In fact, it’s a new way to invest. And if you’re looking for more unusual ways to invest, then this may be a company that would really interest you. Investing doesn’t have to be just stocks, bonds, and options. There are many neat ways to invest.
What is Masterworks?
Prepare to learn about an all new form of investing: artwork! Obviously investing in artwork is nothing new. But the way that Masterworks is doing it certainly is. Masterworks.io is a platform that allows normal people like you and me to invest in pieces of fine art. Now, I’m not saying that the site allows you to buy the Mona Lisa, but maybe one day a small part of it?
Masterworks focuses on enabling those of us who cannot afford multi-million dollar pieces of art to own a small fraction of it. Think of this like you are buying fractional shares in a stock like Amazon (NASDAQ: AMZN). As the value of the underlying asset rises or falls, so too does your fractional piece.
Masterworks.IO was founded back in 2017 by current CEO Scott Lynn. What was the reasoning behind starting a crowdsourced investing platform in fine art? Lynn realized that fine art actually produced higher risk-adjusted rates of return than other assets. But he also realized that fine art has high barriers of entry for normal investors. However, there’s no masterworks stock.
Thus the crowdsourcing platform was born! Fine art is a $1.7 trillion global industry that Masterworks plans on disrupting. According to the website Artprice, which tracks art investing, the market has outpaced the S&P 500’s returns by nearly 180% since 2000. The opportunity is there. And the best part is, you don’t really have to know a thing about art to invest in it!
Can I Buy Masterworks Stock?
As investors, we love to see these first-mover companies changing industries in disruptive ways. These companies always seem to make the best long-term investments, especially if the brand becomes synonymous with the product. Unfortunately for investors, Masterworks is not a publicly-traded company right now.
You will not find any Masterworks stock trading on any stock markets at this time. Masterworks is still quite a small company. So perhaps once it grows larger it will consider an IPO. For now, Masterworks received plenty of private investment funding. As a result, the company has certainly made an impression in the private equity market. Still, CEO Scott Lynn has shown no signs of wanting to take Masterworks public and is focused on growing the platform as a privately owned company.
How do I Join Masterworks?
Here’s the interesting part about Masterworks: membership is by application only right now. To begin investing in fine art pieces on the site, you need to fill out an application form.
It makes sense if you think about it. There are limited quantities of fine art pieces in the world, and Masterworks is trying to keep unscrupulous investors out of the market. This special membership also adds to the prestige of Masterworks and the industry that it deals in.
Another reason why Masterworks has limited the number of users is that it places a cap on how much of each piece an individual investor can own. Masterworks members can own no more than a 10% stake in each piece of art.
If the site had ten million users, it might be difficult for users to invest in any art at all. Until Masterworks can scale up to a larger company and obtain more pieces of art, it’s unlikely it will open up its registration to everyone.
You’re able to join Masterworks if you live outside of the United States though. Many stock brokerages that are based in America do not allow international users. Masterworks welcomes them with open arms! One thing to note, as of this writing, Masterworks did require a formal phone interview before being accepted as a member. It does make things a little more difficult logistically if you live abroad. But it’s nothing modern technology can’t solve! But there’s no Masterworks stock to buy.
How Does Masterworks Work and Can I Get Masterworks Stock?
If you do get approved by Masterworks to create an account, then it’s time to start investing! Well, not exactly. First, you have to add some funds to your account. And then decide on which piece of art you want to invest in. Masterworks does a great job of providing background information about the art and the artist themselves. The company completely understands that a lot of investors just don’t have any knowledge about art; even though they want to invest in it.
Masterworks has its own internal research team that curates all of the pieces of art that the company buys for its investors. The company uses data analytics and market sentiment to determine which artists have momentum. This provides an insight into which artist’s work is likely to rise in value.
Once the piece is chosen, Masterworks will actually buy the physical piece of art and store it in a secure location. Masterworks aims to hold each piece of art for 3-10 years. At which point it will look to sell the piece for a profit. This is how the company pays out its pro rata proceeds to its investors.
If Masterworks cannot find a suitable buyer, then it could opt to put the piece up for auction. I wonder how Masterworks stock would perform in light of how they invest.
Do I Have to Wait 10 Years to see my Return on Investment In Mastweworks Stock?
Yes and no. If you believe in the piece of art that you are invested in, then you are likely to see the largest return if you wait for Masterworks to sell the piece. Masterworks also understands that not everyone has an investing horizon of ten years. The site also offers a secondary market where users can sell their stake in a piece of art to willing investors. This feature is only available to US investors at the moment, although Masterworks is constantly working to update its platform.
Does Masterworks Charge Fees?
Yes, like any other brokerage or investing platform, Masterworks makes a lot of its revenue from fees. Masterworks charges an annual account management fee of 1.5%. This is paid as equity, and requires no out-of-pocket charges to the user. The second fee that Masterworks has is that it takes 20% commission from when it sells a piece of art, assuming it has gone up in price. These fees are unavoidable, and are used by the company to pay for expenses such as art insurance, transportation, and safe storage.
Is Masterworks Legitimate?
Of course! Masterworks certifies that all of the pieces of art that it purchases for investors is completely real and not counterfeit. If you are concerned about actually owning a stake in the art, Masterworks files its shares with the SEC, so the entire investment process is regulated and carefully observed. It is certainly a different way of investing, but Masterworks is a legitimate company with many satisfied users already on the platform.
Is Owning Fractional Shares a Good Way of Investing?
Ultimately this is up to the investor and what their preference is. Owning fractional shares is kind of like a stock split: the pie is the same, but the slices just got smaller.
Now, these slices can grow to be larger than the previous slices, which is what Masterworks investors are hoping will happen with their art investments.
Art is not the only thing you can buy fractional shares of. Most US-based stock brokerages will now allow investors to buy fractional shares of stocks.
This only really benefits investors who wish to buy shares of an expensive stock like Amazon or Alphabet (NASDAQ: GOOGL), where one share can go for several thousand dollars.
Another way in which you can buy fractional shares of an asset is in cryptocurrency investing. Most people do not have $50,000-60,000 just sitting around to buy a whole Bitcoin with.
Instead, we can keep buying satoshis, which are fractional increments of Bitcoin, until eventually, we have either a whole coin or a diversified portfolio of crypto tokens. Just like with art investing, the value of your fractional share of a Bitcoin rises in value as the underlying price of Bitcoin rises in the market.
Conclusion on Masterworks Stock
Masterworks is a fascinating company that’s disrupting the art investment industry. Investing in art has been around in various forms for centuries, but with Masterworks, it is going fully digital. Being able to own a stake in a world-famous Banksy painting is mind-boggling, to say the least. Masterworks is aiming to bring art investing to regular investors like you and me.
The platform is proving that you do not need to be a billionaire to invest in fine art pieces and is bringing an awareness of art into the investing community. Unfortunately for us, Masterworks itself is not a publicly traded company as of yet. Since Masterworks is only about five years old, we could definitely see this platform going public at some point in the future! However, there’s no Masterworks stock now.