This is a sponsored post from Masterworks.io an investment platform that allows everyday people to invest in art. All opinions are my own.
Previous to The Ways To Wealth, I worked in financial services for 10 years.
The company I worked for was a full-service firm, offering everything from investments to insurance.
One of my roles was to manage the personal insurance division. As a firm, we specialized in insurance planning for high-net worth individuals and families.
A handful of our clients held millions of dollars of artwork.
My job was to insure this artwork.
To properly insure artwork it’s important you stay on top of it’s value. This way if a piece was damaged or stolen, our client was reimbursed accordingly.
And it’s in keeping track of the value where I started to see how lucrative investing in art was.
While some clients bought art to display, others bought and sold for profit.
One in particular made millions buying and selling art.
And when something was bought or sold, I was notified–often getting some good info as to why.
How To Invest in Artwork (The Everyday Person’s Guide)
Watching how a successful art investor operates taught me a lot.
It also got me interested in investing in art myself.
But as I learned, there are good reasons everyday people, like myself, should stay away from investing in art.
The primary reason being that I couldn’t afford artwork worth investing in.
Blue Chip vs. Micro Cap Investing
In the stock market, investors like to categorize stocks into different classes.
Two classifications you may be familiar with are blue chip and micro cap.
A blue chip stock is a stock of a large, well-established and financially sound company. Think Apple, Intel, Disney, etc…
Micro cap stocks are much smaller and most often not financially sound.
Micro cap stocks come with a very high risk-reward ratio. Yes, they could double but they can just as well go to zero.
And it’s for that reason that I stay away from investing in micro cap stocks on an individual basis.
The same classifications can also be applied to artwork.
There are “blue chip” pieces of art–these are pieces of art from well-known artists like Warhol or Monet.
Then, there is “micro cap” art–this is most likely artwork based off the latest trends. And just like micro cap stocks, “micro cap” art fluctuates wildly in price.
As an investor, I’d much prefer to invest in blue chip art.
But unlike the clients I worked with, I couldn’t afford artwork that was worth investing in.
Fortunately though, that has changed.
Using Masterworks To Invest In Blue Chip Art
There have been multiple new investment platforms to pop up over the last few years.
One of the most popular sectors is in real estate.
There are now multiple websites that allow anyone to invest in commercial real estate for $500.
The idea is that they open up a new asset class, that offers an attractive return, to everyday people.
In real estate, this asset class was commercial bridge loans. This type of loan has been very profitable to lenders over the years. And now anyone with $500 can invest in it.
Masterworks.io is now applying this same concept to fine art.
With Masterworks you can invest in blue chip art for just $1,000.
For example, you could purchase shares in and own a fraction of a Andy Warhol’s “1 Colored Marilyn” for $1,000.
This painting has appreciated at 11.25% a year since 1990.
And these rates of return are pretty common in the art world.
Since 2000, blue chip-art valued at over $2,000,000 has outperformed the S&P 500 by over 250%.
How Does A Masterworks Art Investment Work?
To understand how you can make money, it’s important to understand the ins-and-outs of Masterworks.
The process starts with Masterworks’ ability to find and purchase blue chip art they feel is undervalued. Once they do, they purchase the artwork outright.
Masterworks then files the piece as a qualified security offering with the Securities and Exchange Commission.
Once they own the artwork outright and it’s listed with the SEC, they offer shares to that specific piece on Masterworks.io.
Masterworks’ goal is to own each painting for 5 to 10 years.
When an offer then comes through from a third-party to buy the piece, shareholders vote on whether to buy or hold.
If the artwork is sold, you get your share of the proceeds, less a fee representing 20% of the profits which goes to Mastworks.
By the end of 2019, Masterworks goal is to have a trading platform available to buy and sell shares.
Until then, you can only profit once a piece you own is sold.
When Does It Make Sense To Invest In Art?
Investing in art is a lot different from the index based approach to investing I commonly discuss.
Nonetheless, alternative asset classes do have a place.
When it comes to art–I see it as a worthy choice for a small percentage of someone’s net worth (e.g. around 5%). More so, this person is passionate about art and will have a sense of pride in owning it.
What I also like about crowdsourced investing platforms is they offer a low-risk way to learn how to invest in a new asset class.
Spending time on these platforms and watching the market is a great way to gain valuable knowledge.
And with Masterworks, signing up for an account to gaining this valuable knowledge is free.