Profit-making page-turners

The 60th London International Antiquarian Book Fair opens at the Olympia Exhibition Centre on Thursday. Around 180 dealers in rare books from Britain and around the world will be attending the event, which runs until Saturday, as part of the Rare Books festival. Everything from medieval manuscripts to modern first editions will be on show at the fair, but the focus this year is on "affordable collectables", with guided tours on hand to introduce new collectors to the market.

Rare books are a good place to start for budding collectors and investors looking to diversify their portfolios into alternative investments. Since the 2008 financial crisis, interest in the market has grown, as Keith Heddle, the managing director of Stanley Gibbons Investment, told The Times earlier this year. "More investors are looking for places to put their money," and they are looking for assets that are not correlated with mainstream financial markets assets such as rare books, coins and stamps. These "fly below the radar and don't have the same cachet as fine wine and art, but if you buy the right thing and hold on to it for long enough, you've got the potential to make a return".

Supply and demand drives the market in rare books. But what makes investing in books "exceptional", says Elliott Haworth in City AM, is that "the supply is finite, and demand is growing", especially in Asia due to a burgeoning middle class. That has been borne out in the Stanley Gibbons Rare Book Index, which tracks the sales prices of 30 modern first editions in mint condition. In the two decades to 2015, the index has risen by 414%. That compares with 351% for the FTSE All-Share index, including dividends. George Orwell's Animal Farm was the best-performing first edition in the Stanley Gibbons index, rising by 17.9% a year in that time from £190 to £5,124.

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Because the rarity and condition of books is relative, it can be fairly inexpensive to start a collection. Collectible books can be bought for as little as the low tens of pounds, yet get it right and the rewards can be huge: a first edition of The Great Gatsby by F Scott Fitzgerald from 1925 sold for £246,636 two years ago. Even that was nothing compared with a first edition of Sir Isaac Newton's Principia Mathematica, which fetched £2.5m at Christie's in New York last December, setting a record for a scientific book sold at auction.

The most expensive book for sale at the London International Antiquarian Book Fair next week is a second folio edition of William Shakespeare's plays, dating from 1632 just 16 years after the playwright's death. But you will need to have seriously deep pockets to acquire it for your collection. It comes with a £275,000 price tag.

Judge a book by its cover

While overall condition is important, dust jackets are especially prized by rare-book collectors. A copy of a book with its original dust jacket in mint condition will command a significantly higher price than another copy of the same book that is missing its cover. To illustrate the point, two leather-bound first-edition copies of Ian Fleming's Casino Royale from 1953 went up for auction at Bonhams on 1 March. The copy without the dust jacket fetched just £1,875, inclusive of the buyer's premium. The copy that still had its original dust jacket sold for £20,000.

Rarity is also important. The Harry Potter series of books is now ten-a-penny, as Mark Wiltshire, a book specialist at auctioneers Christie's, notes in The Times. But when a publisher first agreed to give the boy wizard a punt, only 500 copies were printed. Those first copies can sell today for tens of thousands of pounds.

Also keep an eye out for any signatures inside the cover, which can give a copy a history all of its own particularly if the book has been signed by the author, or had once been in the collection of someone famous. Stanley Gibbons on its website gives the example of authors JD Salinger and Thomas Pynchon, both of whom were "notorious reclusive". Copies of works bearing their signatures are today particularly sought-after by collectors.

Auctions

Going

This week, Sotheby's held its "Latin America: Contemporary Art Evening Sale" in New York. The main focus of the auction was the three-dimensional piece Columna Reticulrea, created in 1969 by Venezuelan artist Gertrude "Gego" Goldschmidt. The wire structure was expected to fetch between $1m and $1.5m. Madre Cava, one of four large wall reliefs carved out of travertine marble in 1978 by the Uruguayan sculptor Gonzalo Fonseca, was given an upper estimate of $700,000.

Gone

A painting of a skull (pictured right) by the New York-born graffiti-artist-turned-expressionist-painter Jean-Michel Basquiat broke the record for the most expensive artwork sold at auction by an American artist last Friday. Japanese entrepreneur Yusaku Maezawa paid $110.5m for the relatively obscure oil stick, acrylic and spray paint artwork, Untitled, painted in 1982. Basquiat achieved cult status in 1988 when he died at the age of 27 from a heroin overdose in his Manhattan art studio.