2022 Masterpieces Review – Forbes Advisor
Users should design their own art investment portfolios
While Masterworks charges a hefty annual management fee, you are ultimately the one who chooses the fractional shares that make up your portfolio. Contrast this approach with a robo-advisor or mutual fund, where professional and experienced fund managers select the investment assets that make up your portfolio.
For investors who have a strong interest in contemporary art, this might not be a major downside. But if you’re not well informed about current trends in the fine art market, you could be at a disadvantage when it comes to making the best choices.
That said, the experts at Masterworks check the quality of each piece and only list the ones they believe have good investment potential. But ultimately, you have to decide which jobs are best for you.
Investments in fine art carry great risk
Masterworks itself warns that investing in fine art comes with big risks. Works of art do not generate any continuous cash flows, such as interest payments or dividends. The only way to make a good return on your investment is if someone ends up buying the part at a higher price years later, which is not guaranteed by Masterworks.
The platform’s secondary market offers users a way to cash out early, but it also comes with risks. Although you can try to sell your shares, there must be another Masterworks user looking to buy, and that’s not guaranteed either.
Higher taxes on fine art
Works of art are taxed as a collectible, subject to a long-term capital gains tax rate of 28%. That’s higher than the long-term capital gains tax rate on conventional investment assets, which tops out at 20% for the wealthiest Americans.
Requires phone interview
Before you can join Masterworks, you must have a telephone interview with one of the company’s specialists. The interview is not a means of rejecting certain applications; on the contrary, it allows Masterworks to get to know you better, answer your questions and recommend investments.
For some potential users who prefer an online-only investing experience and want to get started right away, the interview process can be tedious.
No mobile app
Masterworks is a web-only platform. They do not currently offer a mobile app.
Secondary market only available to US citizens
To buy and sell shares on the secondary market of Masterworks, you must be a US citizen with a US bank account. This could prevent international investors from accessing one of the platform’s key features.