Investment in jewelry, real estate, and art

In some circles, Paulino Que is better known for his collection of old Philippine furniture and other collectibles than as a major buyer of Makati real estate. Like many collectors, Mr. Que buys what he loves to look at and to touch even as he keeps an eye on their future resale or investment value.

You might want to consider these alternative investments as part of your portfolio. Real estate, jewelry, art, and other collectibles bring immediate pleasure to their owners and generally increase in value over time. It is, however, important to manage these carefully and to leverage on these.

Real Estate

Real estate is an important asset class for most investors. Aside from the potential appreciation of land prices, one can benefit from real estate holdings through rentals or leases. Alternatively, real estate may be used as collateral for bank borrowings. Purchasing a home in your 30s is a form of long-term savings since one day you will have paid off the loan and own a valuable asset while, in the meantime, you will have avoided paying rent. Before buying or selling any property, consult with a lawyer on all legal and tax considerations.

Real estate poses, however, several investment difficulties.

• If you are living in it and don’t want to move, it does not generate any income even as you have to spend to maintain it–The return will vary greatly, depending on the long-term outlook for real estate in your locality and the terms of your tenure. If, for example, you can only obtain leasehold on your home that lasts a few decades, its market value will diminish as the lease shortens over time.

• Its market value fluctuates–there are concerns that property markets that have enjoyed high growth during the last few decades may produce lower returns in the future. In general, purchasing a home to live in makes financial sense unless rents are very low.

• It usually takes a long time to sell–It can take months or even years to sell and there are high transaction costs. This means that if you want to sell a piece of real estate in order to fund some other investments or expenditures, you will need to allow sufficient time to complete the transaction before committing the money elsewhere. People sometimes forget this and are forced to borrow cash in order to fulfill their commitments while they wait for a real estate transaction to be concluded.

Jewelry

Just like real estate, jewelry poses three main problems. One, you don’t earn from it unless you sell it and that might take time. Although you can sell these quickly, you may not be able to sell them for the price you paid for them. Two, you need to spend for regular cleaning by a qualified gemologist. Three, prices, except for gold and diamonds, fluctuate, depending on fashion trends.

If you are serious about investing in jewelry, choose stones or items with a "pedigree". De Beers, for example, issues a certificate that details the characteristics of the diamond you purchased. High-end European-branded watches also have a high resale value.

If you choose to go for stones without papers, make sure that these are appraised and authenticated by qualified appraisers. Appraisers will give you the market value of the jewelry you have, so that you would know how much to buy or sell these items for.

Art

Authentication and appraisal are also necessary if you are considering serious investments in art and other collectibles such as ivory santos or saints, coins, and ceramics. Fakes abound everywhere, so make sure that what you have is the real thing.

From an investment perspective, there is no guarantee your collectibles will appreciate in value. As with stocks, what could be hot today may be considered junk the following day. Thus, buy something that you like.

Most collectors will tell you that pricing art has more to do with the artist than the piece. Essentially, what the art world thinks of an artist is a good way to minimize risk. On the other hand, the diminished risk usually means higher prices because other people are in on the artists.

Finding the right piece, knowing when to buy and when to sell, are all things that the seasoned investor learns over time. Remember that art is not a field in which investors make money with quick trades. Art can appreciate over years or even decades.

Asset Allocation

Before making alternative investments, it is important for you to allocate your assets in such a way to meet your various needs. Since there is no way you can project how real estate, jewelry, and art will appreciate over time, you should take pains to put some money in other instruments that may be easier to track and predict.

Depending on your needs, you should have some readily accessible funds for emergencies and place the rest in a variety of investments–some short-term and other for longer investing periods.

(For more information on how you can build your personal wealth or to schedule a free financial check-up, you may call Citibank at 894-7162.)