Get into the swing of bling
Ever since the global financial crisis, investors have been looking for new ways to safeguard their wealth. They have poured money into traditionally 'safe' commodities such as gold, which reached a (non-inflation-adjusted) high of US$1,500 per ounce this month. Concomitantly, there has been a growing interest in fine jewellery and stones, viewed by many experts as a smart long-term investment.
'The beauty with jewellery is that it can fulfil both functions as a wearable piece and as an investment. To increase in value it has to be of good quality, preferably signed, of an original design and wearable,' says Vickie Sek, director of jewellery and jadeite for Christie's Hong Kong.
Business executive Rosana Li has collected and sold jewellery for more than 20 years. The former property agent began buying rare stones such as blue, red and yellow diamonds 10 years ago, and has sold many for a handsome profit, which she has then reinvested successfully in property.
'In the beginning I purchased fun pieces for decoration,' she says. 'Then I wanted to know more and spoke to jewellers about it as an investment. I had a certain budget for pieces I wanted to wear for decoration - around HK$200,000 - but it was considerably more when it came to big investment pieces as I wanted a bigger return.'
As with any new investment vehicle, experts suggest that buyers start out with a sizeable but realistic budget. Terry Chu, deputy head of the jewellery department at Sotheby's Hong Kong, recommends doing plenty of research first.
'Visit jewellery shops and auction previews to get an idea of what stones or pieces you are looking for, price level, market demand and your target,' she says.
Although there is a wide selection of stones available on the market, diamonds continue to hold the top spot for first-time investors.
'It's a safe way to invest your money. I am not saying jade and coloured stones aren't worth just as much, if not more, but more knowledge is required to determine their potential value. Diamonds are relatively straightforward and come with a certificate,' Chu says.
'Diamonds are a commodity - they are more valuable than the brands and the names,' says London-based luxury jeweller Laurence Graff of Graff Diamonds. 'Prices of diamonds have increased significantly in the past few years. Even during the financial crisis the price of diamonds remained stable.'
And when choosing an engagement ring, size does matter. While smaller weights (between one and two carats) are great for personal wear, Chu suggests choosing stones of a minimum three to five carats. She also recommends nearly colourless stones (in the language of the industry, those rated F/G colour) or above and those with near flawless clarity (those rated VS or above). When it comes to shape, classics such as the round will always be in demand.
Coloured diamonds and rare precious stones such as Kashmir sapphires, Colombian emeralds and Burmese rubies are not advisable for new investors, although these purchases will usually yield larger returns due to their scarcity.
'Coloured stones are tricky since there is always a wide range of tone and depth to any coloured variety. A ruby, for example, can have infinite variations in its colour, and people pay for personal preference,' says Chris Del Gatto, chief executive of the fine jewellery resale company, Circa Jewels.
While the stone typically takes the lion's share of jewellery's value, its setting and design also plays a key role. But the metal (such as gold weight) does not factor as highly.
'Collectors are willing to pay top dollar for rare, one-of-a-kind pieces, combined with exclusivity and craftsmanship,' Sek says.
And Del Gatto says: 'Jewellery signed by any of the famous global jewellery houses such as Cartier, Van Cleef & Arpels, Buccellati, Harry Winston and Tiffany & Co always commands a premium.'
This is even more so if the piece is an iconic design of the house, such as Van Cleef's zip necklace or Cartier's panther brooch. Its history or 'provenance', as Sek calls it, also plays a factor.
'Vintage pieces are more popular in Europe or the US - Asians like new pieces or big stones. But the value of a vintage piece does increase if it has an unusual history, or was worn or owned by someone famous,' Li says, adding that one should be wary of fakes or pieces that have been altered as this will diminish their value. Once you have made your investment, the trick is not to expect its value to increase overnight. As with property or shares, you need to be patient.
Li says that investors usually need to wait a minimum of 10 years before they see a significant increase in the value of their piece (taking into account inflation as well). Many other factors, such as market demand, auction trends and the economic outlook, will also affect how well the piece will sell in the secondary market.
'It is a slow investment - if you want to see a big jump, I wouldn't recommend jewellery. It's an investment alternative because it can match a lifestyle - it has mobility and needs minimal maintenance. It's not the best return but you can enjoy the glamour and pleasure it gives you,' Chu says.
Adds Del Gatto: 'We encourage people to buy what they will wear and enjoy, because buying jewellery will never bring a return like a true investment vehicle. But jewellery tends to hold its value better than other luxury purchases, such as high-end clothing and cars.'