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. 

Understanding Blue Chip Art

Blue-chip art refers to artworks created by highly established and renowned artists whose works have a proven track record of maintaining or increasing in value over time. These artists are often considered masters or icons within the art world, and their works are viewed as "safe" investments, similar to blue-chip stocks in the financial markets.

Characteristics of Blue Chip Art

• Well-Established Artists: The artists are typically long-recognized in art history, with widespread recognition from collectors, museums, and art institutions. Examples include artists like Pablo Picasso, Claude Monet, Andy Warhol, and Jean-Michel Basquiat.
• High Value and Demand: Blue-chip artworks command high prices at auctions, often in the millions, and are in consistent demand from wealthy individuals, institutions, and museums worldwide.
• Historical and Cultural Significance: These artworks have cultural importance, often representing key movements in art history, such as Impressionism, Surrealism, or Abstract Expressionism.
• Proven Track Record: The value of blue-chip art tends to appreciate steadily over time, making it a stable, long-term investment. These works have performed well even during economic downturns or times of financial uncertainty.
• Scarcity: Many blue-chip artists are no longer producing works (due to their passing), which increases the rarity and demand for their existing pieces, helping maintain or grow their market value.

Blue-chip art is considered one of the more secure areas of the art market due to the consistent value associated with established artists, but it requires significant capital to acquire.

Factors That 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 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. 

Platforms like Masterworks and Yieldstreet also allow you to invest in art.

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

• Potential for Long-Term Appreciation: Blue-chip art often appreciates over time, outperforming traditional investments like stocks or bonds.
• Portfolio Diversification: Art provides an alternative asset class, helping to diversify and hedge against stock market volatility.
• Tangible Asset: Art is a physical asset that can be enjoyed while serving as an investment.
• Cultural and Social Prestige: Owning blue-chip art enhances social status and provides access to exclusive circles in the art world.
• Limited Supply: The scarcity of works by renowned artists supports their long-term value.
• Low Volatility: Blue-chip art tends to have stable pricing and lower volatility compared to contemporary or emerging artists.
• Tax Benefits: Art investments may offer tax advantages, such as deductions for donations to museums or charitable organizations.
• Global Market Appeal: Blue-chip art is in demand globally, offering greater liquidity than lesser-known artists.

Disadvantages of Blue Chip Art

• High Entry Costs: Blue-chip art can be extremely expensive, with works often costing millions, making it inaccessible to many investors.
• Illiquidity: Art markets are not as liquid as stocks or bonds. It can take time to find a buyer, especially during market downturns, leading to longer holding periods.
• No Income Generation: Unlike dividends from stocks or rent from real estate, art does not provide any passive income. The return on investment is solely through capital appreciation.
• Market Risk: Although blue-chip art is more stable, its value can still fluctuate based on market trends, changing tastes, or economic conditions, leading to potential losses.
• Complex Valuation: Art valuation is subjective and can vary based on factors like provenance, condition, and market sentiment, making it difficult to estimate its true worth.
• Transaction Costs: Art transactions involve high fees, including auction house commissions (which can reach 25%), dealer fees, and taxes, which can eat into profits.
• Forgery Risk: Even blue-chip art is not immune to forgeries. Verifying authenticity can be costly and challenging.
• Long-Term Commitment: Blue-chip art is usually a long-term investment, as significant appreciation often takes years or decades.
• Concentration Risk: Investing heavily in art without diversification into other asset classes can expose you to significant risk if the art market underperforms.

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.

Frequently Asked Questions