There’s a constant debate going on in the world of art collectors.
Should you invest in proven artists, with work that has a consistent record of gaining value…
Or should you try to get in on the ground floor of a budding career?
There are pros and cons to both — so let’s take a quick look.
The Case for (and Against) Established Artists
For many people — despite a long and successful track record — investing in art feels risky.
It’s true — investing in the wrong artist can be risky. Choose poorly, and that living room centerpiece might wind up worth less than the couch it hangs above.
But that’s never a worry when it comes to blue chip artists.
Indeed, when you see numbers about art’s financial performance — like the 12% annualized average returns fine art enjoys — that’s almost always a reference to indexes that track the biggest names out there.
There’s a bit of a truism in the art world — that you can depend on about 10 artists to appreciate in value and everything else is a risk.
The big 10 is filled with names you’d recognize easily — like Picasso, Monet and Warhol. Although a few might surprise — like Basquiat.
That’s not to say there aren’t other artists out there whose work is valuable — or even invaluable. Most of the antique masters aren’t included on the list — not because their work isn’t valuable… but because it becomes available so seldom it’s usually not worth thinking about.
It’s also worth pointing out that not everything done by an artist will go up in value — even if they’re on the list. For instance, Picasso famously enjoyed working with clay and ceramics. Those aren’t his primary media — and they don’t appreciate in value the same way.
In fact, many first-time collectors make the mistake of buying a Picasso ceramic piece, proud that they got a Picasso so cheap. But it’s not valued the way a Picasso painting is — most collectors are happy if they unload their Picasso ceramics at a breakeven point.
Leaving aside those easily spotted hiccups, though, investing in a blue chip artist is virtually a guaranteed way to make money. At a clip that often embarrasses the stock market.
The catch? Other investors and art buyers know this as well. After decades of appreciation, it’s no surprise that blue chip artists go for big bucks.
You’ll never find a good example for under seven figures — eight is more common. And the best works can easily cost over $100 million, which is why most people don’t think of blue chip art as a marketplace they can participate in.
But we’ve found a way around this stumbling block. You’ve probably heard us mention Masterworks before — a company that lets you buy fractional shares of art from blue chip artists.
By pooling your money with others, you can invest in the most exclusive art sales — without having a billion in the bank.
The Case for (and Against) the New Kids
On the other end of the spectrum are new artists with work that hasn’t really been judged by the marketplace yet.
If established artists like Monet are blue chips, these are penny stocks.
Like penny stocks, if you pick the right one, you can realize life-changing returns.
That’s what happened to the Ganzes — a middle-class couple in the mid-20th century with an amazing eye. They bought a number of Picasso works before Picasso was truly Picasso. Their first purchase — Le Rêve — cost them $7,000. It was recently auctioned for $155 million.
These are the sorts of returns that are possible when you invest in up-and-coming artists. You simply can’t realize that kind of profit from established artists.
That said, finding the next Picasso is rare. Most artists — even those who are hot right now — never make it to the top tier.
So if profits are your main motivation, up-and-comers will drive you batty. Just stay away.
However, if you love art, then this type of investing can make a lot of sense.
It gives you a great excuse to get out to art galleries and art shows all the time…
You’ll wind up meeting and speaking with the artists — perhaps even forming friendships…
Your home will be decorated in all sorts of unique, one-of-a-kind pieces that you love…
And it will give you the chance to delve deep into the art world, refining your eye and appreciation along the way.
But only if you see profit as a nice bonus — instead of the main motivator.
As talented as you may be at identifying good art, for every Ganz couple that chooses a Picasso (and a number of other bankable stars as well — they didn’t just get lucky once) there are thousands of serious collectors who bet on the wrong horses.
What’s Right for You?
Only you can decide what kind of collector you want to be.
If you love the art world, surrounding yourself with unique, beautiful pieces and spending free afternoons and evenings at galleries, investing in up-and-comers makes a lot of sense.
You are unlikely to make much money… though, if you pick right, a single piece could set your family up for generations.
If, on the other hand, you are most interested in art as a safe, always-appreciating investment — one that doesn’t conform to the usual market cycles — put your money into the blue chip artists.
It may not be as exciting as discovering something new… But it’s the boring predictability that guarantees your returns. You already know what you’re getting.
Again, you probably won’t be able to afford a major piece from a major artist on your own. (If you can, congratulations: You probably don’t need my advice on making money.)
But with Masterworks, anyone can afford to get in — taking away the biggest hurdle to blue chip art investing.
Whatever you decide, I do recommend investing in art today. With the markets looking ricketier all the time — and trade wars lurching unpredictably this way and that — there’s nothing quite like having a rare, tangible, uncorrelated asset.
No matter what the rest of the markets do.
Editor-in-chief, Unconventional Wealth
P.S. If you want to get involved in blue chip artists, there really is no better way than through Masterworks. To help you get started, Masterworks has agreed to let Unconventional Wealth readers skip their 15,000-strong waitlist and get invested immediately. Click here now and hit “Skip Waitlist” in the middle of the page to join.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...