The reason they gave me for why contemporary art is the best performing style is that newer art appreciates faster than older art that appreciated a lot decades ago, which makes sense, and that art buyers that buy it for display often don’t like the same types of paintings their grandfather would have had on their walls (old, out-of-style). Maybe we should replace the S&P500 chart up there with the Nasdaq100 since tech stocks have been the best performing stock style over the same time period as their chart. I asked them why they only offer contemporary art and they said that art produced after World War II is the best performing style. So, is artwork a good investment? They sure make it out to be. I told them they should display private equity returns for comparison instead which they thought was a good idea and will probably add to their webpage soon. The only reason why I use the S&P500 in comparison examples in a later section is because they do so on their front page with this return chart and it’s the most obvious and easy investment for a retail investor to make. I want to point out that their appropriate benchmark wouldn’t actually be the S&P500, as it would be something illiquid and securitized like private equity. Right on the front of their homepage, they display this performance chart of contemporary art versus the S&P 500.
My first gripe is their misleading promotion of historical returns. Is art a good investment in 2022? What are the pros and cons of investing in art with Masterworks? Historical Perspective: is investing in art a good idea?
For a sophisticated investor, Masterworks is basically a fee scam and this will probably be the only article you will see that talks about the disadvantages of the platform due to the sheer number of blogs that promote it for their own commission interests.
In this article I lay out my various concerns with this alternative investment in art company including the marketing of returns, the business model, fee grab, concerns with the company founder, tax implications and marketing tactics. This is the first and only art crowdfunding site in existence at this time. Their message is that you can buy art as an investment and they advertise that you can invest in “shares” of fine art, $20 at a time. Masterworks is one of the newer alternative investment platforms that have sprung up in the last couple of years, picking up gobs of undiscerning capital flowing through the economy with the stock market at records highs and a non-stop spigot of stimulus checks. PRO-TIP: Get the most on your savings account: 4.55 % APY at UFB Direct (next best 4.10% APY at CIT)
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