Home Investment Jewellery Investing — The Risks and Rewards

Jewellery Investing — The Risks and Rewards

by gbaf mag
gawdo

By Mark Kaufmann writes for Watch Repair Piccadilly

Ancient financial wisdom dictates that sound investments are to be found in precious metals, stones, and the jewellery that lavishes them. But the volatile nature of the jewellery market means that they can sometimes be a risky investment.

At the same time, interest in luxury stones and timepieces has never been higher. So, how can investors navigate the labyrinth that is jewellery investing today?

Diamond mining 

In 2017, diamonds hit a record high in terms of global demand, with the diamond-economy being worth approximately £64.6bn, at least according to De Beers’ annual industry report. The worth of diamonds varies. Exceptional coloured diamonds have exploded in popularity in the last five to eight years, especially as the world is getting richer, and more connoisseurs from Asia and Africa are competing for their luxury.

But as tastes change, the value of the diamonds also changes. This can make them difficult assets to invest in. In addition to this complexity, diamonds are, unlike gold, without a standard price per carat. Instead, their value is based on the diamond’s carat, colour, cut and clarity (the “four C’s”). This only adds to the confusion.

In an attempt to alleviate this difficulty, investors have tried to simplify the process by offering diamond “baskets” as investment products. The Singapore Diamond Investment Exchange has tried this, by offering investable baskets of diamonds with identical properties such as weight, colour, clarity and cut. The way they are traded is similar to a commodities exchange traded fund. This may be the best option for anyone looking to get into diamonds, who is perhaps unfamiliar with them.

Gems

Like diamonds, gems are regulated by the “four C’s”.  It is easy to think that high-end gems automatically make good investments, but that’s not necessarily the case. A lot of the time, gems of lesser value appreciate more and liquidate easier. As a result, many investors choose low-to-moderately priced gems. (Although this doesn’t always rule out returns on high-end specimens.)

There are a few important things to know when looking for a sound investment in gems. First, you will need to know how to buy the right way. Buy as low as possible. There are “Tier 1” dealers, who mine and cut the stones themselves. “Tier 2” dealers buy from primary dealers and resell the gems, usually still well below retail.

The second thing to know is, you will need a certain amount of skill to invest in gems. Most gem dealers have lots of great material available, and good relationships with retailers (like jewellers). They can then send the dealers some stones from their inventory, for the jeweller to cherry-pick and return what they don’t like.

The idea here is: the jeweller will pay full wholesale because they are already close to a sale. The gem dealer will get wholesale value for holding on to the gem for when the opportunity arose. It is important to consider, however, that a successful dealer-jeweller relationship like this will require a lot of skill.

Another important thing to know is that lower priced gems often receive a higher markup than expensive gems. For example, when a jeweller places an order for a customer, they may already have a minimum price set. It doesn’t matter if the gems are priced at £1 or £5 apiece, the jewellers may demand a minimum of £10 to cover the ordering process.

So from an investment point of view, the lower-priced gems might actually be more beneficial.

What about watches?

A luxury watch will not depreciate in value, unlike a luxury car. On the contrary, if you keep it regularly serviced and maintained, it should even appreciate. 

The problem is, like most other investments, the price-gauge of your luxury watch will depend on market trends. The best watches are mechanical marvels, but like all other types of jewellery they are high-value accessories. And this makes them vulnerable to swings in public perception. But the good news is, a luxury watch should never depreciate.

If you are serious about investing in watches to make money, then your best bet might be with the “vintage discovery” route.  By focusing on some of the lesser-known brands which have yet to become popular. For example, a few years ago the Omega brand would have been a great example (though that ship has sailed now). Still, some Cartiers are still great for value, and so are the old entry-level Seiko timepieces.

Other ways to make watch investments

Aside from vintage discoveries, you can find collectible (and therefore, valuable) watches have certain features that make them unique. Like other products and items, manufacturing errors can bestow a unique sense of worth on to what might have been an ordinary watch. Even a subtle error can drive up the sell-on price.

Anyone already familiar with this process might have already heard of the famous Rolex Daytona 16520 ‘Inverted 6’, which had two errors — a coveted white face and an error on the dial rendering the number ‘6’ upside down. This watch is valuable precisely because it did not take long for Rolex to fix the problem, making it a rare and curious specimen.

Other things to look out for include: watches with small production numbers, such limited editions. If such a watch comes into your possession, there will almost certainly be a buyer in waiting to purchase one. Limited editions usually come in the format of milestone celebrations, or with collaborations with celebrities. This latter point usually comes with the added bonus of having an interesting backstory. Which, combined with its celebrity focus, will only serve to increase its value further.

After all, the value of a watch isn’t just in the look. But in the story that makes it what it is.

The most crucial thing

There are a lot of fakes out there, in the jewellery and luxury watch world. So it is incredibly important to only invest in one that has the right paperwork and (ideally) the original box that it came with. These all will add to the confidence that future buyers will need before parting with their money. And of course that authenticity will make your item more attractive and easier to sell.

If you are buying jewellery yourself for the point of future investment, then make sure the paperwork is there; that all of the necessary inspections by the experts have validated it. And you will have invested as responsibly and as sensibly as you can.

www.gawdo.com

You may also like