Choosing assets for investment purposes is not a walk in the park. Unless you’ve got a crystal ball and can predict the future with perfect accuracy, there’s no way of being certain that a specific investment will increase in value, or be whittled away to nothing.
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While the usual route of investing in stocks and shares is appealing for those looking for decent, reliable returns in the long term, there are plenty of alternatives out there which could align with your interests as well as your aims as an investor.
Jewelry is one such example of this, and certain experts will be quick to recommend buying precious pieces not just because of their looks, but because of their potential to turn a profit when you sell them in the future.
So what are the benefits of buying jewelry as an alternative investment opportunity, and are there any caveats or pitfalls that come with taking this route?
Initial pricing is key
It should go without saying, but unless you buy jewelry or gems at the right price, you will struggle to see a good return.
The same rule applies to all investments, and you really don’t want to overpay for an asset that is at the peak of its valuation, only to see it lose traction after you’ve bought into it.
The only way to mitigate risk in this regard is to do your research. If you aren’t all that interested in high end jewelry, it’s probably a bad idea to get involved, because you won’t have the knowledge or the motivation to do your due diligence.
If, on the other hand, you’re already looking for a citrine ring with a vivid yellow hue, or you know your tanzanite from your tourmaline, then you should stand a better chance of getting to grips with the investment side of jewelry and gemstones.
Another given in the jewelry market is that the quality of the materials is instrumental in determining the asking price today, as well as what it might achieve tomorrow and beyond.
If a gem is poorly cut, has too many inclusions, or is in any way chipped or damaged, its salability will suffer.
It’s also worth noting that fashions for jewelry often run in cycles, so you don’t necessarily need to worry about whether what you purchase will fall out of favor, because this could well be temporary. That said, it is better to buy a high quality piece which has a more timeless design, rather than one which is too tied to a current fad, if you want a safer place to invest your cash.
Demand makes a difference
For investment purposes, you might be drawn towards the higher priced, more valuable pieces rather than the more affordable jewelry and gemstone options that are available to you at the moment.
The problem with this approach is that the more costly the asset you purchase, the smaller the pool of potential buyers will be when the time to sell arrives.
A piece which is valued at several thousand dollars might only appeal to a handful of buyers, whereas one worth a few hundred could have plenty of people willing to part with their hard-earned cash for it, for example.
Value can be added after purchase
The asking price of a piece of jewelry isn’t only about the raw materials, but also about how it is maintained and presented.
Adding value is possible if you pick up a piece that is in need of a little TLC, and then carry out any restorative work that needs doing to bring it back to tip top condition.
In the case that you’ve picked up a gem on its own, you might pay to have it cut and set by a specialist. If you choose a vintage piece that has seen better days, sprucing it up with a little cleaning and polishing might be enough to add quite a bit to its valuation.
Diversification is important
Lastly, you need to be realistic about the risks involved in investing in jewelry, and to recognize that going all-in on gems is not sensible for investment purposes.
Diversifying your investments and choosing traditional assets as well as a few alternatives if you’re feeling adventurous is sensible. You also need to make sure that you don’t tie up all of your cash in investing activities, or else you’ll be overly exposed to the inevitable market fluctuations.