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Diamonds as an investment – Does it make sense at all to invest in precious jewelry?
Especially high-quality jewelry is always considered as a form of investment. What about the opportunities and risks of such an investment? Or should private investors rather focus on other forms of investment?
Not all jewelry is created equal. On the one hand, there is the so-called costume jewelry, which is available in many clothing stores and boutiques for very manageable amounts. On the other hand, there are special pieces whose value is at least four-digit sums. Even above them is the so-called high jewelry – very special pieces of jewelry with a value close to higher-class luxury cars. Do not these pieces of jewelry offer themselves to be used as an investment? At least under certain circumstances, such pieces may indeed be of interest to investors.
Collapse of jewelry sales in the corona year 2020
Statistically, sales in the jewelry and luxury watch industry have remained relatively stable for years. With the exception of the slump in the 2020 corona year and the corresponding catch-up effects in 2021.
Fine jewelry as an alternative investment – what to consider
The idea of seeing especially high-end jewelry as a form of investment is an obvious one. However, such an investment is not suitable for every investor:
- Private investors – if you are an ordinary investor looking for a new form of investment, you should be careful with precious jewelry. The purchase price often exceeds the value of other forms of investment, and the return is highly uncertain. On the other hand, anyone who receives such a piece of jewelry as a gift or inherits it can, of course, regard the jewelry as an investment and keep it as a nest egg for a rainy day.
- Wealthy investors – if the purchase amount in five or six figures is not an obstacle, or if these pieces of jewelry are gladly collected for oneself or also received as a gift or heirloom, usually nothing stands in the way of the investment.
The real problem with this form of investment is that the actual value of the jewelry is often not easy to determine and usually varies greatly from dealer to dealer. The jewelry is always worth only as much as someone is willing to bid for it. Many High-Jewellery pieces are made especially for one person and have an enormous individual value that cannot be achieved again at resale. On a small scale, investors can already see this with ordinary heirlooms: Grandmother’s expensive jewelry is now only valued at resale according to hard facts such as weight and the current market price of the underlying precious metal. Thus, the pure material value is calculated. The artistic aspect and the amount of work to create the jewelry usually does not matter. In addition, it is important to consider:
Jewelry does not yield any income
Investing five figures or more in High Jewellery as a private investor is rarely advisable. Anyone who already owns such jewelry or would like to purchase it should carefully study the subject matter as well as dealers and other experts and check in advance how the value of the piece might develop and what resale opportunities are available.
High Jewellery – What makes the jewelry so expensive?
The exclusive precious jewelry differs from ordinary jewelry in the following respects:
- Materials – only high quality materials are processed.
- Craftsmanship – the jewelry is handcrafted by recognized masters of their craft. Hundreds of hours of work can go into simple-looking rings or bracelets.
- Individuality – some pieces from the High Jewellery range are made to measure at the customer’s request and therefore reflect individual wishes and ideas. Such pieces are unique.
As a form of investment, the valuable pieces of jewelry have advantages, but also disadvantages. Especially normally situated small investors, who are not very familiar with jewelry as a financial asset, should inform themselves well in advance and make a comparison with possible alternatives. The advantages and disadvantages of jewelry can be found below at a glance.
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The advantages and disadvantages of jewelry as an investment
Advantages:
- Stability of value – in the jewelry are processed high-quality precious metals and jewels, which in itself already have a relatively high market value. If the jewelry is sold in the normal way, at least this material value is retained.
- Practical – investing money does not require much of your own doing. There is no need to keep an eye on prices, to worry about funds or real estate. Hardly any work and own effort is necessary. The jewelry is simply there as a silent reserve.
- Suitable for conversion – those who want to convert existing hardly interest-bearing time deposits into another form of value may be well advised to use High Jewellery.
Disadvantages:
- Sale – the jewelry can often be sold only to special dealers or jewelers. When selling, it is essential to show a certificate, because the authenticity and legal ownership of the jewelry must be able to prove to the dealer. If a dealer does not ask for proof of origin, you should refrain from engaging with them.
- Sales value – the sales value can fluctuate and unfortunately deviate significantly from the actual purchase price, especially in times of crisis. Custom jewelry in particular, while unique and often possessing a high individual value, is not priced by many retailers at the value thought. In most cases, only the pure material price is remunerated.
- Costs – there are costs for storage. For security reasons, the jewelry should not be kept at home, but protected in a safe deposit box. This in turn incurs costs.
- Lengthy disposal – High Jewellery is not suitable for quickly converting valuables into cash when needed. The sales process often drags on for weeks or months, as dealer offers also have to be compared.
Glittering returns with jewelry? Rather rare. Value stability? Rather.
Conclusion: There are better investment alternatives than jewelry!
For private investors or, more generally, people looking for good investment opportunities for their own retirement security, jewelry seems to be of limited suitability as a financial investment due to the difficult sales situation and the probable loss compared to the purchase price.
There are plenty of alternative investments that are safer and also promise higher returns. And which, above all, also yield regular returns, unlike jewelry.