Mineral Review

Why is jewelry a bad investment?

8 July 2021 0: 00 // Tips for buyers Investing in jewelry is a real investment, i.e. direct purchase of real capital. At all times, jewelry was purchased and presented as a gift not only as a beautiful thing or a symbol of greatness, monumentality, royalty and financial well-being. Jewelry is also a practical property that preserves, and in some cases significantly increases, capital.
Investing in jewelry is a real investment, i.e. direct purchase of real capital. In this case, jewelry. Of course, this type of investment has a number of advantages over other tools and methods. Easy to buy, easy to transport, easy to store, there are no maintenance costs, your asset is always under your control and increases in value on its own (“with nothing” – you won’t be left). But, as with any investment instrument, buying jewelry for the purpose of preserving and increasing capital has its own subtleties. To achieve your goal and not lose your savings, you need to understand these subtleties.
So, you have decided to invest your savings in jewelry. What to do, where to start?
Today’s global jewelry industry offers a huge number of products to any individual. These include bare precious stones of various types and sizes, all kinds of jewelry from the simplest factory stampings to handmade designer pieces, from branded items to noname options from private jewelers. But is everything made of gold, platinum and precious stones an investment? Of course no.
We will understand in order.
Investment is the placement of capital with the aim of making a profit. It is necessary to remember about the term inseparable from “investment” – liquidity. When choosing an investment vehicle, it is important to consider not only capital gains, but also liquidity. Liquidity is the ability of an investment instrument to be converted back into money. The faster you can get banknotes for it, the higher the liquidity, the more attractive the investment instrument. In addition to liquidity, other requirements are also imposed on the investment instrument – reliability, security, guarantees.
It should be remembered that an investment in jewelry is long-term and low-risk. With the right choice, it is reliable, safe, with guaranteed conversion into cash. At first glance, the simplest option is to invest in “naked” gemstones. But there are difficulties here. There are a huge number of scams with precious stones on the market. If you are going to purchase precious stones somewhere in a raw material country, hoping to maximize the price, you need, at a minimum, a reliable gemologist who can help you distinguish a fake from a real stone. You also need to remember that investment stones are not all stones in a row. Any semi-precious stones are not an investment. Diamonds, rubies, sapphires, emeralds and alexandrites are considered investment gemstones. They must be between 1 and 15 carats in weight, of high clarity and good color (for colored gemstones), or colorless (for diamonds). Investment diamonds should not have fluorescence.
Let’s say you acquired real gemstones with excellent characteristics at a great price. Here I will immediately disappoint you. The likelihood of purchasing single copies plus at a truly competitive price is extremely low, even outside of Russia. Most likely, you will buy stones below the retail price in Russia. This is a good option if you are buying to save money on making jewelry for yourself, but not as an investment. Firstly, when you try to sell stones, you will realize that no one but you needs them. Private traders for sure. Even at a bargain price. Especially if there are no certificates for the stones. Jewelry workshops, ateliers and individual jewelers, even if they buy stones from you, will do so at a price that will be significantly lower than the original price. Banks and pawnshops remain. In Russia, neither one nor the other accepts bare colored gemstones, even with certificates. Pawn shops buy back diamonds with an average loss of 90%. As a result, there are a lot of problems when purchasing, stress, expenses on flights, choosing stones, purchasing, and the result of the investment is negative.
The next option is to order jewelry from private jewelers, workshops and ateliers. An ideal option when you want to save as much as possible on purchasing replica brands or acquire a high-quality exclusive – a single piece of jewelry with a single design. If you went for the first option, forget about investments altogether. You bought a beautiful trinket with a claim to be an imitation brand. You didn’t win in price, you lost. If you try to sell, any pawn shop will accept your jewelry without certificates and boxes from the brand as scrap. That is, at best he will pay 10-25% of the price spent. You shouldn’t count on an increase in the price of such a product either. Ideally, only the price per gram of gold or platinum in a pawnshop will increase, provided that prices for gold/platinum on the stock exchange rise.
By ordering a designer exclusive, you invest in pleasure. Which, to put it mildly, is poorly converted back into money and its price growth is very doubtful. You can try to sell a stunning designer piece of jewelry with stunning characteristics of precious stones through auctions. Disadvantages – a long wait for the buyer, commission costs start from 10%, the final price is unknown, it is necessary to take into account the taxes of the country where the auction is taking place. Also, some well-known auction houses practice delaying payment for up to 70 days. In the end, you can win a little, you can lose a little. And you’ll have to forget about high liquidity altogether.
Another option is to buy real branded jewelry. However, brands that do not belong to the premium category can only be sold as scrap in the future – again with losses of 75% to 90%. At least with precious stones, at least without them.
For premium brands, some pawnshops will give a maximum of 30% of the cost – this is subject to the safety of the original certificates and boxes. The cost of jewelry from premium brands changes over the years, except in recalculation of the price per gram of gold at the time of sale. That is, they hardly change or fall significantly if retail trade in the jewelry industry declines for economic reasons.
Where then can you find “investment jewelry” and do they even exist? Yes, they do exist.
There are jewelry and watch houses on the world market that offer investment jewelry – Graff Diamonds, Empire G. Royal jewelry house, Rolex. Purchasing jewelry from the above brands allows you to save your nerves, increase your capital, purchase a truly investment product without fear of counterfeiting, and receive guarantees. All three jewelry houses have official representative offices in Russia. Prices in official representative offices do not differ from foreign branches, that is, going somewhere outside of Russia is not at all necessary.
Graff Diamonds is a vertically integrated jewelry house. Founded in London in 1960. Specializes in natural investment diamonds. Graff is the royal grandeur of the British dynasty. As a rule, Graff Diamonds jewelry contains only exclusive and famous diamonds, which are little subject to stock market speculation and are constantly growing in price. When choosing Graff jewelry, it is best to focus on those with a single diamond of at least 6 carats, as this is the most profitable investment position. Graff Diamonds increase in value depending on the market demand for Graff Diamonds jewelry. Unlike bare stones and jewelry from other brands, Graff Diamonds beauties are always in demand almost everywhere, and therefore even any pawnshop in Russia will be happy to buy such jewelry for approximately 30% of the cost. Therefore, famous auction houses remain the most profitable way to sell Graff Diamonds jewelry.
• There is always high demand in the market, which makes it much easier to exit an investment through auctions with the closing of the lot at a profit, especially when it comes to the exclusive Graff line.
• High recognition.
• Security against counterfeiting (subject to purchase from an official Graff representative).
• High cost for investment jewelry (from $500000).
• Problems associated with auction sales (commissions, taxes, hold (delayed payment)).
• Difficulty of profitable exit from investments in Graff Diamonds in Russia.
• In some cases, jewelry is dependent on stock market speculation on diamonds.
Empire G. Royal jewelry house is a vertically integrated jewelry house. Founded in Dubai in 1977. Specializes in natural investment colored precious stones (rubies, sapphires, emeralds, alexandrites). Empire G. – generous and dizzying palace luxury and the grandeur of the East. It is not for nothing that all the most famous and massive jewelry with more than a hundred years of history were donated by the sheikhs to the British royal family. Until 2017, the jewelry house adhered to a policy of secrecy outside the walls of eastern palaces and dressed only members of the royal blood of the Middle East. In 2017, Empire G. opened its doors to aristocratic and wealthy people in Russia. Empire G. jewelry is good for the constant increase in prices for colored natural gemstones and the absence of exchange speculation with their prices, since rubies, sapphires, emeralds and alexandrites are classified as “rare earth minerals”, finite resources and undervalued assets. The Empire G. investment line is attractive not only for the quality of precious stones in jewelry, but also for additional services. The client of the Empire G. investment line is given the opportunity to profitably exit the investment without additional problems and difficulties associated with the sale of Empire G. jewelry and the transfer of ownership rights. It is enough to simply bring the jewelry to a bank (including in Russia) that cooperates with Empire G., go through a simple procedure for verifying the jewelry, which will take no more than an hour, and receive at least 70% (depending on the period of ownership, but not earlier than in a year ) from the funds spent on the purchase of jewelry. Empire G. jewelry is growing at least 3% per year in the fourth year of ownership. When purchasing an Empire G. investment line, in addition to certificates, you will be given an offer agreement and a bank hotline telephone number.
• High liquidity.
• Guaranteed capital gains.
• Security against counterfeiting (subject to purchase from the official representative office of Empire G.).
• There is no need to leave Russia to purchase and exit investments.
• Low awareness among the general public.
Rolex SA is a Swiss watchmaker founded in London in 1905 and moved to Switzerland in 1919. When we talk about Rolex watches, we mean them as a symbol of excellence, craftsmanship, prestige and innovation. It’s not for nothing that all the most influential people in the world (presidents, billionaires) own Rolex. In addition to status, Rolex watches are undoubtedly a profitable investment. The most popular watch among the Italian mafia was Rolex, as it was very easy to turn back into money. Any Swiss bank will gladly accept a real Rolex and, after verifying the authenticity of the watch, will pay up to 60% of the cost. Outstanding famous examples can be sold profitably at auction.
• High recognition.
• High demand.
• High liquidity.
• Security against counterfeiting (subject to purchase from an official Rolex dealer).
• Difficulty of profitable exit from investments in Russia.
In conclusion, I would like to note: by investing correctly in jewelry, you create a liquid investment cushion not only for yourself, but also for your future generation. Exceptional jewelry pieces are not subject to fashion trends and only become more expensive over the years.
Source: Article. Russians see buying jewelry as one of the most reliable ways to invest money. According to VTsIOM, this type of investment ranks fourth in popularity after purchasing real estate, opening a bank account and storing cash. According to Thomson Reuters, in 2016 Russia entered the top ten countries with the highest demand for gold jewelry. The growing interest in jewelry and rare stones is typical for turbulent periods in the economy, says Irina Stepanova, executive director of the Sotheby’s auction house in Russia. According to her, in recent years there has been a great demand for such products on the market. Jewelry is one of the ten assets of the Knight Frank Luxury Investment Index, a special index of investments in luxury goods that tracks the dynamics of investments of ultra-high net worth individuals, that is, people with a net worth of $30 million or more. As follows from the latest Knight Frank report, jewelry is one of the most profitable assets in this portfolio (which includes ten types of luxury goods: antique furniture, Chinese porcelain, watches, colored diamonds, jewelry, postage stamps, art, coins, wine and classic cars). Over 12 months, jewelry has increased in price by 4%, over the past five years – by 49%, and over ten years – by 142%. The only more profitable luxury goods from the Knight Frank index over a long-term investment horizon are cars, wine and coins.

The lot of the rich?

Not every piece of jewelry can increase in price. Despite the faith of Russians, in most cases, mass-produced products are not suitable for investment, so only certain categories of jewelry can be considered a successful tool for increasing and preserving capital. “Buying jewelry as an investment is like investing in art. Not every purchased painting will increase in value in the future, but works by sought-after artists or universally recognized masterpieces will always be a good investment,” explains UFG Wealth Management partner Oksana Kuchura. The purchase of mass-produced jewelry, which is sold in chain jewelry stores, cannot be considered an investment instrument, experts say. “On jewelry for consumer consumption in Russia, there is a very large markup by sellers, not to mention taxes. Such jewelry is two to three times more expensive than the metals and precious stones that are used in them,” explains Otkritie Broker analyst Andrey Kochetkov. After purchase, they immediately lose part of the price, which is associated with various markups and production costs, since they can most often be sold based only on the price of the precious metal. Only certain categories of jewelry may increase in price in the future. “Firstly, these are products with large natural stones, since the cost of stones is growing much faster than the cost of precious metals,” says Eduard Utkin, general director of the Russian Jewelers Guild association. Stones weighing more than one carat are considered large on the market among precious stones, and among semi-precious ones – from about five carats, the expert clarifies. The second category is jewelry that is complex in execution and artistic design, which have cultural or historical value, are works of art or antiques. According to Utkin, the cost of products in both cases starts from several hundred thousand rubles, and the value of a unique product can only be fully appreciated after 20–30 years. Investing in jewelry is a matter for wealthy investors, says Eldiyar Muratov, president of the Singapore Castle Family office. “Investments in jewelry houses are only available to the wealthy and are aimed at preserving capital and achieving significant price increases in the future,” he says. In this case, “wealthy” means the public with assets of $5 million or more, the expert clarifies. However, not the richest investors can bypass the restrictions and make money on jewelry, experts interviewed by RBC are confident. For example, says Andrey Kochetkov, you can try to find jewelry with a lower markup. “If you have the opportunity to visit a country like the UAE, then you can buy gold jewelry from local jewelers at a 10-15% premium over the price of gold on the exchange. It is quite obvious that such a purchase can justify itself in a shorter period of time,” he notes.

Advantages and disadvantages

There are benefits to investing in jewelry. The acquisition price in this case is not volatile and is unlikely to fall. “It will remain constant for some time, and then gradually begin to increase depending on the increase in the cost of stones and metal and the increase in demand from collectors. It’s almost impossible to make a loss here,” says Anna Kokoreva, deputy director of the analytical department at Alpari. In addition, the advantages include the high capital intensity of assets. “Precious items allow you to concentrate a huge amount of money in one small object. Due to their small size and weight, there are no problems with storing them,” says Eldiyar Muratov. The main disadvantages of investing in jewelry are low market liquidity, a long investment period and a high entry threshold. As in the case of buying paintings, the investment horizon for jewelry is usually 20–30 years, and the cost of jewelry at auctions usually does not fall below $300–400 thousand. “It is difficult to determine the lower entry threshold. At auctions, jewelry can be sold starting from $100 thousand, but during the auction the cost can rise to $2 million,” explains Muratov. It is also unlikely that such investments will be realized immediately, especially since this process requires special expertise, adds Anna Kokoreva. “To buy a valuable piece of jewelry, you need to spend money on expertise and safe transportation, and to sell it, you need to pay a commission to an auction or other intermediary, and also find a buyer,” she says. The cost of services will depend on the complexity of the examination and transportation. The minimum cost for assessing jewelry, according to the expert, starts from 35 thousand rubles. and higher. The commission to the intermediary can be 0,5–3%. You can make money by buying jewelry in the short term (one or two years), however, income in this case will depend not on the increase in the historical value of the product, as in the future 10–20 years, but on changes in prices for precious metals and stones, competition among counterparties and, most importantly, on the level of demand for a particular product and the ability to find the right buyer, explains Muratov. Such cases are rare, but they do occur. “An example would be a transaction from one of our clients. An investor purchased a gold ring with a very rare blue diamond for $2,1 million from a private collector (with an 8% discount), and then four months after the purchase put it up for sale at a closed auction and sold it for $2,75 million, earning thus $650 thousand,” says Muratov.

How to choose

The cost of jewelry is influenced by several factors: the name of the jeweler, provenance (history of ownership), uniqueness, characteristics of the stones and the period of manufacture, says Irina Stepanova. “Also, of course, the quality and safety of the product and confirmation of the authenticity of origin are important,” adds Anna Kuchera. The gemstone greatly influences the cost of jewelry. It is better for an investor to purchase products with rare and high-quality stones, experts advise. According to Irina Stepanova, now the most expensive and in demand are colored diamonds and precious stones such as sapphires, rubies and emeralds. Among diamonds, according to the Fancy Color Research Foundation (FCRF), blue diamonds showed the highest returns over 12 months – their average cost increased by 5,5%. According to Eduard Utkin, in recent years, non-precious stones, such as aquamarines, beryls, tourmalines and turquoise, have also become more expensive. “The price for each stone is different, but, for example, an aquamarine stone 15 years ago cost about $15 per carat, but today they give about $1 for 300 carat of this stone,” he gives an example. By the way, if an investor wants to focus specifically on a precious stone, then creating custom jewelry can be profitable. To do this, you can purchase an unframed gemstone and find a professional jeweler who will make a masterpiece out of it, says Eldiyar Muratov. “Such a product may turn out to be “one-piece” and have no analogues, which will increase its value. The cost of manufacturing the product in this case will be two to three times less than when purchasing an analogue in jewelry stores. Savings will occur due to a reduction in distributor and brand markups, logistics costs and due to a minimum markup on the purchase of stone and scrap,” notes the expert. Another point worth paying attention to is the origin of the product. As a rule, jewelry with an interesting biography rises in price faster than others. In addition, the likelihood of finding a buyer for them among collectors is higher. You can find out the history of jewelry in the jewelry houses themselves and from jewelers, if they keep archives with registration numbers of products and names of customers. Among the famous jewelry houses, experts name Harry Winston, Buccellati, Van Cleef & Arpels, Graff, Tiffany & Co, Piaget, Cartier, Chopard, Bulgari and Mikimoto. However, experts warn that belonging to a large jewelry house does not guarantee that the price of jewelry will increase. If this is not an exclusive piece of jewelry, but a mass product, then, despite the well-known brand, its price most likely will not change significantly. Experts advise taking a closer look at the works of individual craftsmen who have created and are still creating unique pieces of jewelry. Thus, ​among the high-profile acquisitions of recent years in the jewelry market, Knight Frank experts name the sale of jewelry by such authors as Suzanne Belperron, Andrew Grima​, Georges Braque​, Coco Chanel and Peter Chang. In addition to recognized masters, you can also pay attention to the products of young, as yet unknown jewelers and jewelry companies, advises Eduard Utkin. “Now it is profitable to invest in our young national brands. The cost of their jewelry is still underestimated, since there is no premium for brand fame, while the quality of workmanship and artistic design are at a high level,” the expert notes. Such jewelry, according to the expert, is obviously undervalued and will rise in price within five to seven years. Among young and promising Russian companies, Utkin names, for example, eight companies that took part in the London jewelry exhibition in September 2017: these are the jewelry houses ArgentoV, Ringo, Russian Gems, Chamovsky, Kabarovsky, Treasure House, Echo and Alzena . An increase in value can also be expected from jewelry associated with certain historical periods – these are products created in the 1900-1920s, as well as in the 1950s, says David Warren, director of the jewelry department at Christie’s in London. According to him, the cost of such jewelry is constantly growing, as they have historical and cultural value and are in demand by collectors. According to Knight Frank, over the past ten years the cost of antique jewelry has increased (by 63%), items created between 1945 and 1975 (by 73%), as well as jewelry from the Belle Époque (a symbol for the period of European history between the last decades of the 1914th century and 93, by XNUMX%). Creating a jewelry collection can also have a positive effect on the price. “If you are lucky enough to collect a collection of Patek Philippe watches or Van Cleef brooches from a rare series, this increases its value and demand,” Irina Stepanova gives an example. You can collect not only works by one author, but also products from the same era. “If you combine pieces from the same historical period, when you decide to sell the collection, the pieces will likely be worth more than if you sold them individually,” concludes David Warren. According to him, this is a profitable tactic, however, it is almost impossible to predict with certainty whether the collection will increase in price and by how much. You should only purchase exclusive jewelry from reliable sellers or directly from well-known jewelers. “Then this product will be accompanied by the necessary certificate of conformity and reputation. In other cases, there is no guarantee that this product is not a replica of the original or even a fake,” warns Andrey Kochetkov.

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