When it comes to investment, art is not the first thing that comes to mind. Stocks, bonds, certificates of deposit, annuities, and exchanged funds are popular investing choices. However, investing in the art market offers plenty of benefits.

For example, the creative market has higher interest rates, is largely unaffected by the market’s unpredictability, it’s a tangible asset, enables portfolio diversification, and enjoys a high appreciative value. It also provides a sense of self-satisfaction, largely missing from other options like bonds and stocks.

Platforms like Masterworks allow people the option to invest in high-quality works of art by famous artists. Thus people can buy and sell shares that represent an investment in art pieces. They also get the opportunity to build a diverse portfolio of works by receiving assistance from a research team.

Buying shares is an ideal choice if fellows want to avoid taking loans. It allows them to own works by original artists, which, when purchased by buyers, leave them with profits. 

How does it work, and what are some related questions? Find out.

How does art investment work?

Selection of the artists 

A company specializing in iconic artworks selects a list of artists through analysis and research using proprietary data to determine which artists have the most popularity in the market at any given time.

Buying the paintings 

The acquisition team of the platform springs into action, trying to find an impressive piece. Once they find an art piece to their liking, the company buys the paintings. 

Analyzing the artwork

After buying the artwork, the team offers a circular to the Security and Exchange Commission, opening it up for interested investors.

Offers various selling options

  • Selling through the company 

Usually, a company dealing with art investment holds a painting for three to ten years. Once they sell the artwork, you receive the pro-rate proceeds after deducting a certain fee for the services rendered by the company.

  • Secondary selling 

Some platforms also offer you the option of selling the shares on a secondary market. Buying and selling shares on the secondary market (a market where investors purchase shares directly from other investors) comes with benefits and risks, which you should consider before proceeding.

One of the benefits is the easy access to shares, which are available for 90 days after the primary offer closes. The second is the absence of transaction fees, while the third advantage is the lower minimums.

Because the platform is usually not involved in these transactions, valuing your shares or monetizing your investments are fraught with risks. 

Questions to ask the company

What is their management fee?

Every art investment company has a specific management fee, which varies from one to another. It includes insurance, administrative costs, annual appraisals, regulatory filings, and professional storage. 

How many clients have they had in the past?

A company’s portfolio gives you a rough idea of its past performance and credibility. You could ask them the number of paintings they have offered clients in the past, do they have sufficient experience in this industry, and whether they can suggest a fair price for your purchases.

Do they have a price database?

Experienced companies have a price database that informs you about the artists with solid momentum in the market. It also has other uses, including tracking and evaluating art in relation to other assets, building your portfolio using proprietary historical data, and monitoring the art using repeat sales data. 

You can take the help of platforms like Masterworks to invest in artworks by buying shares, as the benefits of doing so are many. It will allow you to diversify your investment portfolio and enjoy higher returns without being affected by market fluctuations. 

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