How To Make Jewelry A Good Investment
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Jewelry, especially diamonds and gems will last a long time, so often when buying you will hear claims like this is a “great investment” and “diamonds will always be worth more than what they cost”. But that is not necessarily true
I always say the best time to make a profit is when you buy (because its a lot easier to sell anything, including diamonds and jewelry, at a profit if you bought well in the first place)..
Remeber, with luxury and discretional goods such as jewelry, supply and demand is everything.
Historically jewels have appreciated at about the same rate as money inflates. Unlike most luxury items that wear out and decay over time, jewelry, and especially diamonds, can last forever. They also have more intrinsic value than for example cars and houses (unlike land which does have intrinsic value).
However, be cautious what you buy because the “fashion value” of jewelry can be unpredictable, unless the diamond is a timeless cut and/or the jewelry piece is a collectable.
When you come to sell the biggest problem is finding a buyer who shares your taste and wants to buy what you want to sell right now.
As a private seller you need to keep the following issues in mind:
1. Why should buyers trust you? How do they know the diamond / jewelry piece is real?
2. A jewelers name and reputation, like Tiffany, command a premium because of branding and trust. You are likely to lose that premium when you sell yourself.
3. As a private seller, you offer a buyer little or no prestige, and no flexibility, or service (e.g. ring sizing, appraisal etc.)
4. Buyers usually only want the gems. They give you nothing for the setting which matched your taste, not theirs.
5. Few people are diamond investors compared with say properties or shares, where it is easier for a buyer to compare the prices of similar items. Jewelry requires a lot of specialized expertise.
6. Jewelers have slow stock turnover, so they need big mark-ups to stay in business and this portion of the sale price is lost when you come to sell.
So given these disadvantages, what makes jewelry a good investment?
1. Jewelry is a portable investment that is independent of banks.
2. Some women consider their jewels as personal security or their “running away” (not many diamonds are returned if the relationship ends).
3. Jewelry is an emotional or family investment; a diamond ring marks a wedding, a ruby piece for a wedding anniversary and they are usually an important part of an inheritance. .
4. A $100,000 diamond ring has more ‘investment’ potential than a $1,000 ring. There is relatively less cost to selling an expensive piece; as the value goes up, seller’s margins come down, just like in real estate.
Most of the time you are buying jewelry for emotional reasons, not to sell for a profit. But you still want to buy something at the right price and a piece that will gain in intrinsic value.
What is the best investment?
1. Consider buying something that can be worn most of the time (not left at home for thieves) and you may not need to pay to insure it.
2. A single diamond does not go up in value faster than say a pair or a matched set in a 3 stone ring.
But a single stone may be more liquid than a collection. A single stone might cost less to set.
3. “Investment diamonds must be D Flawless or VVS quality”. What rubbish! Rarer diamonds are the hardest for you to sell. Medium quality diamonds (with no visible imperfections or obvious discoloration) are more saleable, and go up in value at a proportional rate to rarer more expensive diamonds.
4. Fashion cuts that are hot at the moment, are likely to be be passé in a few years. Round, brilliant cut diamonds are the most resell-able and the best investment in the long-term.
5. 90% of round diamonds are poorly cut. A clever buyer will buy a non-traditional ‘Ideal Cut’ diamond that will fit into the new GIA and AGS best cut standards.
6. Fancy colored pink diamonds may become rare they are also hard to re-sell.
Summary
There are opportunities if you are prepared to do your homework to acquire diamonds and jewelry that also make a secure investment.
But don’t buy with a goal of making money by reselling, unless you intend to make it your business.
Footnote:
Many vendors will trade diamonds up and some are generous if they sold the stones in the first place. The general restriction is that that you must spend the same amount as the original purchase or the trade in value of the diamond / jewelry piece.
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