As an alt investor who deals with physical assets, you probably came across the term "blue chip art.” In the past, only a select category had access to this kind of art: those who were wealthy, and those who were very wealthy.
People invested in blue chip art by purchasing the paintings themselves and hanging them in their vaults or galleries. Many art collectors built their wealth this way, by buying promising art that not only looks good but also increases in value. Things have changed since then.
Nowadays, blue chip art may easily be bought through fractional ownership – which means that auction houses are not your only option. With fractional ownership, you only buy a share of the painting, which implies that you will become a co-owner along with other people. You are not specifically buying into the company’s vision, but you are purchasing a part of the artist's oeuvre.
Thanks to NFTs and alternative investments, blue chip art has gained a lot of popularity. If you are planning to invest in this type of art, you must know as much as possible about the types of artwork there. This article will tell you everything you need to know about the blue-chip market.
Blue chip paintings
When you first hear the term “blue chip,” your first thought is probably that the painting has a lot of blue in it. That is not exactly it. The “blue” in the term has more to do with the symbolism of the color. Blue has long since been associated with wealth and prosperity. This is why royal families in the past were said to have “blue blood,” and why certain pieces of value were painted in blue.
In terms of paintings, “blue chip” has more to do with the stock market than anything else. It mainly refers to stocks that are considered reputable and are most likely to make a profit.
This term was first used in 1923 by Oliver Gringold – an employee at Dow Jones – after he noticed the behavior of certain stocks. He noted that some stocks were trading past $200 per share, referring to them as “blue chip.” The reference in this case was made after blue poker chips – the most valuable ones.
Since then, blue chip paintings would mean that the art pieces were made by established artists, which fetched a very high price. It also referred to paintings that would likely increase their value over time. They also sell at high prices at auctions and have been sold and re-sold throughout the years.
At the same time, blue chip art does not necessarily mean that the artist must be a classic, such as DaVinci or Picasso. Blue chip art may simply be paintings of contemporary artists, but they have gained a lot of recognition over the years. As long as they are well-recognized, with multiple paintings that are likely to grow popular over the years, their work may be recognized as a “blue chip.”
Blue chip art investment
Considering that art values are steadily increasing, blue chip art investment can turn out to be very profitable. According to the Artprice Global Index, art value has increased by 30% over the past 20 years. This means that if you purchased a blue chip painting in the early 2000s, its value has significantly increased by now.
How to Invest in Blue Chip Art?
If you are a beginner in blue chip art, you may want to start with smaller investments. Regardless of its type, art investments carry risk. At the same time, aside from choosing paintings you believe will be successful, you should make sure you enjoy them.
With blue chip art, you need a lot of patience. Profits can take decades to build, as their value increases at a slow yet steady rate. It is also important to find the right people to help you invest, especially if you do not know much about the art market.
A good investment broker should be able to analyze the auction information, anticipating how the prices will change over time. Using that data, they should know which artist will appreciate their value over time.
Considerations for Investments
A good blue chip art investment should have an annual return of 9%-15%. If it is anything lower than that, it may suggest the investment is red chip and not likely to sell. While you may be tempted to go for even higher returns, you need to be very careful about your chosen investments.
If a painting brings very high returns, one of two scenarios may happen: the artist has been around for a while and managed to create a solid reputation. If that is not the case, the second scenario may have happened: the popularity was caused by something we refer to as the bandwagon effect.
Thanks to the Internet, it is very easy for new paintings and artists to become viral. The artist may even auction several pieces at very high prices. Along with the trend and sudden success, many people may believe that they are facing a good potential investment.
The problem with the bandwagon effect is that the sudden popularity can go down just as fast as it went up. When the trend fades and people jump off the bandwagon, choosing another, the value of the investment will drop. This is why you need to choose an investment with a solid and steady popularity increase, spanning preferably over a few decades.
What makes a blue chip artist?
Blue-chip artists are those who have made art that would only increase in value over time. They managed to create a solid reputation among art connoisseurs, and a simple painting costs thousands or even millions. For example, take the Mona Lisa of Da Vinci, which was assessed at $100 million in 1962, and then estimated to be around $900 million in 2021. The price is speculated to go even past $1 billion, making it priceless – and further establishing DaVinci as a top artist.
Blue-chip artists can be those who are currently active, along with those that are retired. That being said, to be labeled a blue-chip artist, you must have a certain reputation attached to your name. The more decades are backing the artist up, the better it will be.
This is why the majority of blue-chip artists are either retired or deceased. Ultimately, the artist would have needed to make a name for him or herself in the world of art. Prices of classic paintings are often going through the roof, steadily increasing every decade. Simply owning a fraction of these paintings would increase the value of your portfolio.
Some of the most popular blue-chip artists are Pablo Picasso, Jeff Koons, Jean-Michel Basquiat, Mark Rothko, Keith Harig, and Kaws. That being said, artists such as Edgar Degas, Claude Monet, or Amedeo Modigliani could also be labeled as blue-chip artists.
What is a blue-chip vs red-chip artist?
When talking about blue-chip artists, you will likely come across another term: red chip. What is the difference between the two? Is one less appealing than the other? Here are a couple of details.
Differentiating Between Blue Chip and Red Chip
Blue-chip artists are those who have managed to build a strong reputation for being successful. Their paintings have been sold at numerous auctions and galleries, and their name is likely to ring bells among collectors. They are the artists you would have no qualms investing in because they have been around for a long time now.
Red-chip artists are the polar opposite. This is not because they are less talented than blue-chip artists, but because they haven’t been around for long. Red-chip artists are emerging or upcoming artists that are creating pieces for both the primary and the secondary market.
A red-chip artist is often new to the art market and will not join it through traditional methods. They rarely use dealers or art galleries to give their work more exposure, as they believe these “old-fashioned” methods will take too long. Instead, they used the Internet to gain more exposure. Mediums such as social media represent the most common method they use to gain exposure.
Unlike blue-chip artists that steadily gain their reputation over time, red-chip ones soar very fast. They will also sell their art pieces at auctions, often fetching a very high price. This makes it a non-traditional way of selling art.
The problem with red-chip artists is that they are very difficult to predict. They can soar in popularity very fast but can drop out of it just as quickly. Since they aren’t prominent names on the market, there is a chance that their paintings would decrease in value once the trend dies down.
At the same time, many red-chip artists have a very strong online presence. Based on their progress, some can also build a long-term reputation of success. Their digital art may easily be converted into NFTs, which can bring profit in the long run. A good red-chip artist may sell their pieces in art auctions for up to 500% of their value.
Why Are Blue-Chip Artists So Popular?
Blue chip art is very popular in every alternative investment market, along with the collector’s category. That being said, nowadays, many painters are using modern techniques, creating works of art that are even more beautiful than “the classics.” So, why are the classic blue-chip artists more likely to fetch higher prices?
The reason for that is simple: as most of the blue-chip artists are either retired or deceased, they will not create any more works of art. This makes their remaining works even more valuable, as they are the last from the artist’s collection. No other pieces will be made.
Aside from their scarcity, their technique also makes them highly appreciated. They were pioneers of their time, introducing the world to different styles, shades, and forms of beauty. These artists have retired after creating a solid path for others to walk on.
This is not to say that contemporary artists will not gain the same popularity in the future. Still, compared to blue-chip artists, their lack of background makes them a risk. Investing in a red chip painting could either bring great success or cause significant losses. This is why investing in blue-chip artists is often the safer investment.
Blue chip art investment: The Bottom Line
Investing in blue chip art is a low yet steady way for you to increase your wealth. This form of alternative investment may take years to bring significant results, which is why it requires patience. That being said, with the right choice, you may easily make a winning investment.
Consider using a reliable investment platform such as Investables to choose your pieces. This way, you will know your fractions will bring success in the future.
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