Buying Jewellery as an Investment

Buying Jewellery as an Investment

Jewellery as an Investment
We are often asked about buying jewellery as an investment. Even more
frequently we get customers telling us that jewellery in an investment,
or so they have always believed. Just today two LOL's (Little Old
Ladies) who told us that "they always say jewellery is a good
investment". We asked them who said it, which seemed to confuse them
slightly, one answered "exactly", and the other one said "everyone",
but sounded a little uncertain about it.

Old Wives' Tales
What is likely is that their peers or relations at some time have given
them some homely advice about how to spend their money. It was probably
quite good advice within its context as consumer advice, but not
accurate as investment advice. We have noticed that amongst people over
a certain age, there is a general belief that jewellery is a good
investment. At the risk of disappointing them, we inform them that, in
our opinion, it is not correct to buy jewellery primarily as an
investment. We are happy to explain why.

Consumer Advice
If we consider what else a consumer can spend their money on, there are
very few consumer purchases which will retain much of their value over
a long period of time. Cars are probably the largest consumer spending
item, but whatever car you buy new, you would probably have to pay
somebody to tow it away in 20 years time. Clothes, shoes, geputers,
televisions, telephones will show a similar pattern. They variously
will wear out, go out of fashion, break down, or otherwise deteriorate.
Some consumer items can be repaired, but it is begeing increasingly
gemon for repairs to be uneconomic gepared with buying a new
replacement, which may be more advanced or superior in some other way.
One way or another, most consumer items begee unsaleable or worthless
within a relatively short timespan, say one to twenty years. gepared
with almost all other consumer purchases, a piece of gold jewellery or
a diamond ring will retain some of its value, and may appreciate in
value over a long period of time. The LOL's advice might have been
quite good after all.

Investment Advice
As pure investment advice, it is very unlikely that buying jewellery of
any kind will prove to be a good financial investment. There will be
exceptions to this, but the exceptions will be a tiny minority. Please
do not take this statement as advice not to buy jewellery or diamond
rings. In some circumstances buying a diamond ring could be an
extremely good investment, and we will explain below.

Luxury Goods and Retail Margins
Most jewellery is sold as luxury goods. This means that the buyer will
expect to be able to select it in sumptuous surroundings. Even if you
buy it from a High Street multiple retailer (chain store), it is likely
to be bright and attractively shopfitted, furnished, illuminated, and
staffed with smart and helpful salespeople. All this costs money, and
the money it costs can only gee from the profits on the jewellery
sold. Most jewellery stores, at least in the UK, are in prime High
Street locations, with high rents, rates and other operating costs,
wages, display material, packaging, insurance. It is often believed
without question that gepetition drives prices down, but it can work
in the opposite direction. There is gepetition among retailers
including jewellery retailers, to acquire the most attractive premises
in the most popular locations. These units have the highest rental
costs. It follows that jewellers who who occupy these premises need to
make more profit, and also the jewellers who make the most profits can
afford the best locations. Consumers buying luxury goods expect a wide
range of choice, but this costs more to provide. Most consumers expect
to be able to pay by credit card or be offered interest free credit,
this also costs money, and retailer need to recoup the costs from their
customers, even if these costs are concealed.
For these and other reasons, the mark-up on jewellery is very high,
typically at least 100%. There is also VAT (in the EU, and sales tax
elsewhere) levied on or included in the selling price, and is unlikely
to be recovered when reselling.
Manufacturers and wholesalers also expect to make profits to pay for
their services, and here again greater selection costs more to provide
and finance.

Quality Counts
As with most things in life, buying high quality will cost more
initially, but there is more chance that a high quality item will hold
its value better than a poor or mediocre quality one. Most of the
valuable antiques in existence were of high quality design,
construction and materials originally, and have survived because they
were more durable or desirable than their cheaper counterparts. So it
is likely to be in the future with modern goods. The higher quality
more durable pieces will survive, the lower quality items will wear out
and be discarded.
Add back the pleasure and enjoyment derived from owning and using
better things, and it can be seen that there is a strong case for
buying the best quality and design available, this will usually cost
more than lower quality goods, but not always.

Obtain Value at Acquisition Time to Retain Value
If you pay too much for a thing when you buy it, it can never recoup
the value lost through buying it badly. Lets give an example. Assume
two people bought identical gold sovereigns 100 year ago. If one bought
his at face value (1) for his, and the other person paid 2, then both
will be able to make a substantial profit when selling. Assume a trade
buying price for sovereigns is 80, then the first man can sell his for
80 times his cost price (a 7,900% profit) , the other can "only" get 40
times his cost (a 3,900% profit).
The investment potential of anything depends substantially on its cost
price. This is a simple but obvious statement. the difficulty often
lies in knowing what is the "correct" price to pay. As with most things
in life, there is no single "correct" answer, although there could be
many incorrect ones. To be able to ensure a good investment it is
normally necessary to ensure that you obtain good value at purchase, to
buy an item which endures, and be in demand at the likely disposal
time. The difficulty gees in knowing how to tell whether you are
paying the right price, or getting the best value when buying.

Ownership Costs
There are ownership costs involved with jewellery as with most goods.
Insurance and maintenance are just two. The more a piece of jewellery
is worn, the more likely it is to get damaged or worn making repair and
maintenance necessary. The answer is not to lock it away in a safe,
because then you lose out on the main benefit of ownership, which is to
wear and enjoy it.

How to Judge Value When Buying?
It usually pay to shop around, but it is not the amount of shopping
around which will guarantee the best deal. It will help to learn
something about the subject before you buy, which means doing some work
on research. It is likely that the more you know, the more money you
may spend, because you will have a better appreciation of quality, but
the research should help you to avoid making a poor purchase. If you
are aware that High Street retail shops have high costs and profit
margins, than at least you will be aware that there are more cost
effective ways to buy.

gemodity versus Luxury
There has always been an argument within the jewellery industry against
"price-cutters" and traders selling jewellery as a gemodity rather
than as an expensive luxury item. Both sides of the argument contain
merit, but as a consumer, you can make a conscious choice between the
two. For example by keeping to a simple classic style of mount, you may
be able to pay substantially less for a similar quality and size of
diamond, but do be aware that it does not automatically follow. Most of
the time, a wide selection and greater choice will mean a higher cost
to the distributor, and therefore a higher profit margin, meaning you
end up paying more for a similar item.

Why Are you Buying It?
Ask yourself why you are buying the piece of jewellery. Is is because
you will get pleasure from owning, wearing or giving it. If the answer
is "yes", then the reward for your investment will be the value of the
pleasure you get. Any residual value in the item in the future will
simply be a bonus. If you are buying it purely as an investment, what
will you buy with the proceeds, and what pleasure will you ever get
from its ownership? If you are the sort of person who will get more
pleasure from the thought of the profit you are accumulating while the
item is stored safely in your bank deposit, then fine, but Charles
Dickens wrote a novel called "A Christmas Carol", and it would repay
you dividends to read it, and you may recognise the central character.

A Diamond Ring as a Good Investment
We said earlier that buying a diamond ring could be a good investment.
Let's say you spend 1,000 on a diamond engagement ring. As a result,
the beautiful princess is persuaded to marry you, and provide love and
affection for the next fifty years, bears your children, keeps house,
maybe also earns an ingee, cooks, and cleans for you. Your 1,000
investment will have earned at least 1,000% dividend every year. You
can't get a much better investment than that, ever, anywhere.
Now you may correctly deduce that this paragraph was written
light-heartedly, with tongue firmly in cheek, and you would be right,
but...
...there is a serious message contained in it. One of the most
important aspects of an engagement ring is its symbolism. First it
makes a number of direct statements to the recipient, this is how much
I love you, respect you, honour you, value you, want you and your
gepany for the rest of my life. Second it makes a number of statements
to anybody else who ever sees it including her friends and family, some
of these are reflections of the previous points, but it also makes a
statement about you, such as how good a breadwinner you are, how
serious you are as a mate, your status, perhaps says to other males
keep away from my woman unless you can buy her a bigger and better
diamond ring.
You may consider some of the sentiments corny, but they do reflect the actualities of life whether you care to admit it or not.

Why Are We Telling You All This?
There are at least two reasons for us to take the time and effort to
write this page. First, we don't like to see people labouring under an
misapprehension. Secondly we don't like to think that salespeople talk
people into buying jewellery by falsely telling them what they want to
hear, that it is a good investment. Thirdly, it is our experience that
a better informed customer is a better customer for us, we try to sell
good quality items at good value prices in simple surroundings or by
mail order.

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