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How Investing In Art Through Masterworks Could Protect Your Capital In Turbulent Times

Jude Phillips
ByJude PhillipsAug 23, 2022In partnership with Masterworks

My parents always taught me the value of money. When I was around 5 years old, my dad opened a kiddie bank account for me, and every month, he’d drop $20 in there. For my birthdays, all the money that family members sent would go straight to that bank account. He never really let me touch it until I went away for college. I recognize that I was very privileged because of my dad’s ability to spare part of his check for my future education, but it taught me that putting money each week or month into a savings account can add up years later.

Fast forward to the future and I’ve been living thousands of miles away from home for the last 5 years. It’s made me realize that I need to start thinking about my financial future more seriously – now more than ever. I have a full-time job and a side gig that lets me save some extra cash for a rainy day. Sadly though, that’s not enough. I live in one of the most expensive cities in the world, and a night out will easily rack up a three-digit bill. And let’s not even talk about the inflation that everyone around the world is currently experiencing. That’s why investing peaked my attention.

I needed an additional income that can soften the blow if we fall on hard times. But, big decisions that involve throwing some money out into the void – which is what I think stocks and investments are – always made me a little nervous. I had no idea what I was spending my money, time, and effort on and it just took up a lot of faith that I simply didn’t have.

Cue Masterworks

Masterworks is the only investment platform of its kind that allows you to buy shares in fine artworks by artists like Basquiat, Picasso, Banksy and so much more. When you sign up, you will see the artworks that Masterworks has bought in order to offer shares. You can invest in a share of an Andy Warhol original for $38 if you wanted to.

You will then have your share until the painting is sold and you get paid any profits from the sale or until you feel like it doesn’t make sense for you to own it anymore and you can sell your share to someone else if the time is right. Not only does Masterworks allow you to actually see the pieces you’re investing in, but, let’s be honest, you feel a different type of classy when you say you own a share of a Picasso painting.

Here’s why investing in artwork through Masterworks could help you get ready for a possible recession:

Low correlation to the stock market

When you think of investing in stocks, you think of Wall Street and putting money into companies like Apple, Tesla, and Amazon. However, if the market crashes, all that money that you accumulated through the years will go right down the drain. That’s why diversifying your portfolio with stocks that aren’t correlated with the traditional market can be useful, such as art. So even if the market crashed, you could still make money when a painting sells.

Art prices appreciate

On their website, Masterworks cites Artprice’s findings that blue-chip art prices have outpaced the S&P by 131% over the last 26 years. This means that artworks have increased in appreciation at a faster rate than some of the largest companies measured in the index. And historically, it has been shown that art will still go up in price when inflation happens. This doesn’t mean that there aren’t risks, like with any other stock or hedge, but it gives you a long-term alternative in investing.

Secondary market access

Let’s say it no longer makes sense for you to invest in art. Masterworks lets you sell your share of your pieces in a secondary market to other platform users. However, it's not guaranteed that the person will buy them for the same price you got them but the option is still there. It is a good fallback if you can no longer keep a Picasso in your investment portfolio.

Takeaway

In a world where the stock market might crash at any moment and inflation is making it harder to afford everyday necessities, investing in art could be a logical addition to your portfolio because you can invest in an asset that may not decrease in value even when the value of stocks go down.

See important Regulation A disclosures at Masterworks.io/cd. There are significant differences between investing in art and other traditional forms of investment such as stocks, bonds, and other asset classes.