What is Blue Chip Art?

Investments are limited to shares of companies and funds, but they can also be in tangible things, such as art. Many art collectors purchase art not only because they think it’s beautiful but because of its investment potential. Blue chip art is high-quality artwork with a strong appreciation history, making it a great investment to add to your portfolio. 

How Does Blue Chip Art Work?

High-quality art is more than something pleasing to look at. It can also diversify your portfolio as an investment. But what is blue chip art? The term blue chip means the art is high quality, with a good chance to increase in value. Then, the collector can sell the art once it appreciates. It’s similar to when an investor purchases a stock to sell it when it rises in value.

How is Blue Chip Art Traded?

Blue chip art is typically bought from auction houses and galleries. Many auction houses around the globe specialize in the selling of fine art, such as Christie’s, Sotheby’s and Heritage Auctions. Auction houses buy work from well-established artists to bring value to their patrons.

When an investor wants to trade or sell their piece, they can ask an auction house to list it. The auction house takes a percentage of profits in return. There are also many online auction houses, but these typically bring in less cash.

What is Blue Chip Art and How Does It Differ From Other Forms of Art?

What differentiates blue chip art from other art is the artist’s reputation and the quality of the art. Blue chip art is created by a well-established and renowned artist whose pieces have a steady history of greatly increasing in value after the initial sale. The artist’s reputation and the market demand cause the value of the piece to steadily rise. Its provenance, or history of ownership, may show that only reputable collectors purchase it, which also increases its value. Emerging or contemporary art is by up-and-coming artists, so their value isn’t determined the way that blue chip art is.

What Factors Contribute to the Value of Blue Chip Art?

The value of blue chip art is influenced by several factors. 

• The artist’s reputation: A well-known and established artist’s work is going to be valued much higher than an upcoming artist’s. Established artists who have a proven history of their art pieces rising in value after the sale are considered blue chip artists.
• Market demand: Just like the stock market, market demand will affect the price. The market function is designed to raise the value when there’s a high demand for a specific piece or an artist.
• Historical significance: If that art piece has a significant history, demand will likely rise. 
• Rarity: If there’s only one copy of the piece, it’s much rarer since there’s less in the market. This will increase market demand.
• Condition: Collectors want pieces in mint condition. The better condition they’re in, the higher they’ll be in value.
• Provenance: Who has owned the art before is almost as important as the artist. If well-known collectors and investors have held the piece before, they saw value in it and this alone can cause the value to rise.

How Does the Blue Chip Art Market Function?

The blue chip art market functions through art galleries, auction houses and private sales. Collectors and investors buy and sell blue chip artwork, either directly from the artist, from another collector or through an auction house. The prices and value are driven by demand, the artist's reputation and market trends.

How Do I Invest in Blue Chip Art? 

To get started investing in blue chip art, you’ll need to purchase artwork from established artists through art galleries, auctions or private sales. It's important to research the artist's reputation, consult with art market experts and consider factors such as historical significance and potential value appreciation before making a sale. 

What Makes Art Considered Blue Chip?

Blue chip art refers to artwork created by renowned artists with established reputations whose art has a history of rising in value. These artists are internationally recognized, and their works are highly sought after by collectors and investors. This reputation increases market demand for their pieces, making them more valuable.

What Are the Potential Risks and Rewards of Investing in Blue Chip Art?

Investing in blue chip art comes with its own unique set of potential risks and rewards. Blue chip art is a long-term investment, and collectors have the opportunity to watch their art grow exponentially in value. Art is also a great way to diversify your portfolio while preserving cultural value.

On the other hand, the art market is extremely volatile. There are no guarantees that artwork will appreciate, even with a renowned artist. Trends change quickly, and investors need to work with an expert to assess art before purchasing. Art is a fairly illiquid investment and comes with high transaction costs, such as paying an auction house, can reduce overall return.

How Can You Ensure the Authenticity and Quality of Blue Chip Art? 

Art shouldn’t be bought on a whim. Investors need to do their due diligence and confirm the authenticity, quality and value of blue chip art. This process involves researching the artist, the trends of their other pieces, provenance checks and overall market trends. It’s best to consult an expert before purchasing.

How is the Value of Blue Chip Art Determined?

The value of artwork may fluctuate regularly and is determined by factors such as the artist's reputation, historical significance, rarity, condition, provenance and market demand. Before a sale, the artwork will likely be appraised. If sold through an auction house, the auction house will have an internal appraiser who will provide the starting price. It may go up during bidding. 

In a private sale, the seller should have the artwork appraised to determine an asking price. The buyer may also bring an expert to conduct due diligence; negotiations will allow them to settle on the final price.

Things to Consider with Blue Chip Art

It’s important to understand an investment before purchasing. Here are a few things to consider with blue chip art before adding this alternative investment to your portfolio.

Rarity and Scarcity of Blue Chip Artwork

It’s not easy to break into the blue chip art world. Blue chip art pieces are rare and in high demand, making them hard to find and purchase. This scarcity is what makes them so high in value. If you do find one, be prepared to spend a large sum on it.

Historical Significance and Artistic Reputation

When considering a piece, look into its historical significance. Was it considered groundbreaking when it was first sold? Was it regarded by important figures? For example, pieces by Andy Warhol have significant history, making them more valuable. The reputation of the artist will raise demand for their pieces, which will increase the value of their art. 

Auction Records and Market Prices

Previous auction sales and market prices of a piece can give investors insight into a piece's value, as well as its appreciation over time. Being sold for high prices is a good sign and indicates high quality and credibility. 

Preservation and Conservation Considerations

To ensure artwork continues to rise in value, it needs to stay in mint condition. That means artwork can’t be purchased and shoved in a closet somewhere. It needs to be properly handled, stored and maintained to ensure the condition is preserved. For example, artwork can’t be stored in direct sunlight or places with high humidity. It needs a cool, dry room to preserve the colors and texture.

Expert Evaluation and Authentication

Investors can do a lot of their own research and due diligence, but that shouldn’t replace expert advice. Art consultants specialize in identifying and valuing artwork and can provide insight into market trends. Investors should leverage their knowledge before deciding on an investment. 

Market Liquidity and Exit Strategies

Art is a fairly illiquid investment, meaning it cannot quickly be made into cash. If an investor is considering selling artwork, they need to decide on their exit strategy. They could sell through a private sale, where they sell directly to another investor or collector. They could also sell to an auction house, which offers the opportunity to get a higher price due to the competitive nature of auctions. However, auction houses do take a percentage of the sale in exchange for selling it. Finally, they could sell to an art fund, which is a pool of money dedicated to buying art.

Emotional and Cultural Value

Investing in art is a much more emotional experience than buying and selling stocks. Art is designed to bring out an emotional response and contribute to a larger culture. Buying and preserving art can come with the immense satisfaction that the investor is contributing to the preservation of culture and an important piece of art.

Advantages of Blue Chip Art

Blue chip art is a unique alternative investment that can greatly diversify your portfolio since the blue chip art market is entirely separate from other markets. It can even be included in self-directed IRA accounts. Since blue chip artwork is already well-established, there’s a better chance of achieving a sizable return on investment. There’s also the satisfaction that the investor is contributing to the preservation of culture and the pride an investor may feel over owning such a valuable piece of art.

Disadvantages of Blue Chip Art

There’s potential risk associated with every investment, and the art market can be volatile. Even pieces by renowned artists may dip in value suddenly with little to no explanation. The lack of liquidity may also pose a challenge to investors. Obtaining art is more challenging than purchasing many other investments and requires more maintenance. It may be hard to find blue chip artwork for sale. And when investors do, they’ll need to work with an art consultant to determine authenticity and value. After purchase, investors will need to properly store and maintain the piece to ensure it stays in prime condition. It’s not an easy investment, though many art collectors feel the pros outweigh the cons.

Comparing Blue Chip Art vs. Emerging Artists

Blue chip art refers to artwork by established and renowned artists. Their reputation allows their pieces to steadily rise in value since they’re so sought after. Emerging artists have yet to establish a reputation. It’s hard to determine the appreciation trajectory of art by an artist who is new to the scene, making it a riskier investment. Artwork by emerging artists will typically either sell for low prices or extremely high prices. However, they typically do not continue to steadily rise the way blue chip art does. 

Add Culture to Your Portfolio with Blue Chip Art

If you want to grow your portfolio while also preserving culture, then blue chip art may be a good investment for you. The market is volatile and determining value may be a long process, but blue chip art offers the potential for strong returns that can help you achieve your financial goals. Check out a gallery or auction house near you to get started building your blue chip art collection.

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