I used to stare at my jewelry box dreaming about all the money I could make selling it one day.
But now I know why jewelry is a bad investment. I don't know how I could have been so silly.
If you think along the same lines as me, we'll look at why you should avoid investing in any more jewelry right now.
10 Reasons Why Jewelry Is A Bad Investment
Some of these might shock you. Others won't surprise you at all. Here is a big list of the main reasons why you should avoid investing your money in jewelry:
- The Markup For Jewelry Is So High
- You're Paying For The Construction
- Jewelry Is Easy To Lose
- Jewelry Doesn't Fit Everyone
- Jewelry Doesn't Go Up In Value
- Very Low Demand For Jewelry
- Disruptions In The Market
- New Discoveries
- Monopolies And Bubbles
1 The Markup For Jewelry Is So High
Jewelry stores buy their merchandise at wholesale prices and by the time it reaches the shelves the markup is massive.
The price you pay for jewelry is around 200-300% more than what they paid. Diamond engagement rings and jewelry from luxury brands are even more.
It's estimated the average person can expect to recoup 20-60% of their money back once they've sold a piece of jewelry.
Would you invest in 10 dollars if it was only worth 20 cents once you bought it? Jewelry loses money as fast as cars driven off the lot.
Some people even go around secondhand markets and trinket shops hoping to find jewelry for pennies on the dollar.
2 You're Paying For The Construction
Gold doesn't come out of the ground in the shape of a round band. Cut diamonds were once rough diamonds. Someone has to physically make jewelry.
When you buy jewelry from the store you're not just paying for the gemstones and precious metals.
Simple gold jewelry is probably 30% more expensive due to design and construction, which you won't get back when it's time to sell it.
I know you read a lot about the price of gold and silver rising all the time, but that only counts if you buy the purest forms of bullion in bars and coins.
3 Jewelry Is Easy To Lose
Investments shouldn't be something you can lose because it falls down the sink.
Nobody can pick up your stock portfolio and carry it away. I'm sure you'd keep expensive paintings locked in your home.
You wear jewelry daily and it's easy to lose some over the years. I know I've lost of necklace that had real sentimental value.
Even if you only wear expensive pieces of jewelry on special occasions it's a risk.
Invest in things nobody can snatch off your neck when you're walking past.
4 Jewelry Doesn't Fit Everyone
Everyone can invest in stocks, cryptocurrencies, and their own business.
Your jewelry probably doesn't fit a large number of people. And those it does fit might not even want to wear it.
Rings are a good example to use. The average woman in the US wears a ring size 6 to 7. If your ring is too large or small who will buy it?
Necklaces and bracelets need to be lengthened and shortened too, which isn't going to help it hold any real value.
It's better to invest in something everyone loves.
5 Jewelry Doesn't Go Up In Value
There are so many options for investments that go up in value. When you invest in stocks you can live off the dividends.
Investing in your own business can bring you a huge ROI. Investing in jewelry brings you nothing because it doesn't go up in value.
The price of precious stones might rise with inflation, but you've already lost so much on them at the point of sale.
A gold ring or necklace isn't going to skyrocket in price over the years.
Jewelry stores and pawn shops will maybe pay 50 cents on the dollar
6 Very Low Demand For Jewelry
Nobody is going to buy your jewelry as an investment because smart investors don't invest in jewelry.
If the resale market isn't there you'll be left holding onto jewelry nobody wants. Jewelry like stainless steel is basically worthless anyway.
If you have an exclusive design from a luxury jewelry brand you'll be able to get a decent amount of money for it.
But you would have paid a lot of money in the first place, and I bet it wasn't so you could hold onto it as an investment.
7 Disruptions In The Market
Disruptions in the market affect the price of things all the time. Think about how many people buy Rolex watches because they're a good investment.
I'm not saying the price of Rolex watches is going to plummet tomorrow, but think about how many people under 25 would rather wear an Apple Smartwatch on their wrist.
Is something going to come along to replace rings, necklaces, and bracelets? Lab-grown diamonds could hurt mined diamond engagement ring prices.
8 New Discoveries
Satellite technology can find vast swaths of gemstones under the ground. It won't be long before it can pinpoint them more easily.
We haven't extracted the earth of all its gold and silver yet. If there was a big enough discovery it would hurt the price of either metal straight away.
Whenever the market gets flooded with precious metals and gemstones it will bring down prices. Jewelry stores will sell their jewelry for less money.
Nobody is going to buy jewelry from you when they can get it cheaper at a professional store.
9 Monopolies And Bubbles
Large companies and governments have too much power over the price of jewelry for it to ever be considered a sound investment.
Do you remember what happened to De Beers years ago? The company was mining an unbelievable amount of diamonds.
They kept most of their diamonds locked up in warehouses. Diamonds appeared to be rare and people were willing to spend more money on them.
Companies with large supplies of gemstones can use reserves to stay competitive by dropping prices when necessary.
And the price of gold is great right now because lots of governments are keeping their excess money on gold, but it's not going to last forever and the bubble will eventually burst.
Gold has been used as a form of currency for over 2,500 years.
And US currency used to be based on how much gold it had in reserve. Gold and currency still are connected to some degree.
What would happen in the future if governments decided to tie their currency to a cryptocurrency?
I'm not saying it's going to happen soon and it might not be Bitcoin, but it's a slight possibility we can't ignore.
There have already been rumblings about countries creating their own cryptocurrency.
What would happen to the price of jewelry if nobody cared about gold anymore? It would only be worth whatever someone was willing to pay for a shiny piece of metal.
Why Jewelry Is A Bad Investment
It's unfortunate jewelry prices are so high even though they lose nearly all their value as soon as you walk out of the jewelry store.
The main reason why jewelry is a bad investment is that you won't get your money back. There are various reasons for this but it's pretty simple. If you invest in jewelry you're always going to lose money once it's time to sell.
Maybe you should buy a gold coin and gems from a dealer. If you make your jewelry at home you won't lose so much money.