Jewelry looks pretty and could serve to make a good impression—whether you’re preparing for a job interview or looking for a romantic partner. But in addition to its aesthetics, it can be highly valuable, depending on what it’s made from and how it’s put together. This makes it a potentially lucrative investment opportunity in addition to being a significant fashion choice.

But is jewelry really a good investment for long-term growth toward retirement, or the preservation of wealth?

The Benefits of Investing in Jewelry

Let’s examine some of the key features of jewelry that make it a “good” investment:

• One of the best advantages jewelry offers is its tangibility; in general, tangible investments are safe investments. Necklaces and rings are things you can touch, admire, and store away in a safe (unlike abstract investments like stocks or bonds, which may be tied to a paper trail, but are more conceptual than pieces of jewelry). This makes jewelry especially appealing to risk averse investors, or those who avoid digital transactions.
• Jewelry is also highly portable. Investing in real estate while you’re living in a specific area is advantageous; you can easily drive to the property if you need to take care of any repairs or maintenance. However, if you end up moving, the property will remain behind, and you could be forced to hire a property management company or sell the investment to make it more convenient. You can’t take it with you the way you can with jewelry.
• Ability to hold value. Jewelry has always been valuable, and there’s no sign that it’s going to plummet in cultural value anytime soon. It’s used as a status symbol, as gifts, as a gesture of love and affection, and it’s used as a fashionable, practical accessory as well. This, combined with the fact that it’s usually composed of rare materials, means it’s always going to be in demand, and will therefore be indefinitely valuable. It’s hard to tell if a specific business’s success is based on a fad or on smart management strategies, but you know people will still want jewelry in 50 years.

Complicating Factors

These benefits aren’t the whole story, however. Not all jewelry holds value, or grows in value, the same way over time. The value of jewelry is often tied specifically to:

• The history of a piece of jewelry could increase its value tremendously. For example, traditional cocktail rings worn nearly a century ago have stories behind them, and a stylistic character that can’t be replicated by today’s jewelers. If you look back even further, historical pieces that are irreplaceable will likely sell for many, many times their original value. If you hold onto your modern pieces indefinitely, they may be able to attain similar growth, but if you’re going to sell them within your lifetime, you can’t expect to see the same return.
• Rarity of materials. Much of the value of jewelry is based on the precious metals the pieces are made from. Materials like gold or diamonds tend to fluctuate over time somewhat inconsistently, based on demand and availability, both of which can change at the drop of a hat. It’s unlikely that rare metals and materials will ever become truly “common,” but these unexpected fluctuations make investing solely based on material value somewhat risky.
• Original markup. Most jewelers sell pieces of jewelry at a high markup to make a substantial profit. While the original materials themselves are quite valuable, the retail industry likes to double or triple the price before they get to you, the consumer. If you’re purchasing jewelry firsthand, this makes it nearly impossible for you to get the full value of your investment back—even if it ends up appreciating over time.

Compared to Other Investments

In terms of ROI and growth over time, jewelry still pales in comparison to other investment opportunities. Estimations on the average (long-term) return on stock market investments usually hover around 7 to 12 percent, while more stable investments, like real estate, will return something like 3 to 5 percent (plus whatever you’re able to get from incoming monthly rent). Values of precious metals and jewelry vary far too wildly and unpredictably to make a comparable estimate.

That doesn’t mean you shouldn’t buy jewelry; it has practical value in terms of regular use, and for many people, is quite beautiful. You just shouldn’t use it as the core component of your nest egg.

Categories: Investment