by Jerry Edgerton
Are the wild swings in the stock market making you anxious? Does the real estate slump have you worried about the resale value of your house? If so, it might be time to consider some tangible investments whose value moves independently from stocks or real estate. As an added benefit, some of these assets are beautiful items you can enjoy as well as invest in-a nice change from reading your 401(k) retirement account statement.
All these material investments-gold, antiques, oriental rugs, and collectibles-require patience and educating yourself about the topic. With antiques and rugs, especially, you need to consider holding them a decade or more to get maximum gain. But-assuming you take good care of them-having these pieces in your home is an added dividend. That's why you need to specialize only in fields you really love.
Gold is a favorite investment of those who don't like what they see in stocks or in U.S. government policies-especially the large deficits. Gold tends to rise when the U.S. dollar is falling against other international currencies or when fears of higher inflation surface. Since 2001, gold has more than doubled in value while the dollar is down about 25%. But analysts believe that gold could continue to move well above its recent $730 an ounce-partly because high oil prices contribute to U.S. and world inflation.
Editor Curtis Hesler of the newsletter Professional Timing Service-which advises investors on what assets to invest in or avoid-also believes heavy buying by China will help push up gold prices. Says Hesler: "I fully expect to see gold eventually hit $1,600 an ounce." Real gold partisans often want to own gold bullion directly, but this usually involves storage costs. One new method has emerged on Wall Street, which would allow you to cash in readily on rising prices. Or, if it suits your passion, you can hold less-liquid gold jewelry.
If you want to collect, collect whatever makes you happy.
- Exchange-traded funds-Similar in format to the ETFs that invest in the Standard & Poor's 500 or other groups of stocks, these funds own gold bullion instead of stocks. Each ETF share is worth one tenth of an ounce of bullion. The ETFs are Streetracks Gold Shares (symbol GLD) and iShares COMEX Gold Trust (IAU).
- Jewelry-Like antiques and rugs, you need to buy what you like. Even if gold prices have risen sharply, you have no assurance of what your price will be since you will have to sell through a dealer or in a private sale. That said, gold jewelry aimed at investment as well as elegance holds value best if it is in 24-carat gold.
"You should buy antiques primarily because you like them and feel comfortable living with them and because they reflect your tastes. Their profit potential should be a secondary consideration." Most specialists agree with that advice from Prof. Craig Birdsong of the department of design and merchandising at Colorado State University in Fort Collins. Before you make a serious investment, decide what you like and learn as much as you can about it. Potential sources of information are local dealers with a good reputation, publications like Antiques Magazine or Antique Quarterly, and various Web sites specializing in one area.
You should buy antiques because you like them, feel comfortable living with them, and they reflect your tastes.
Experts also agree on this advice: Buy the best item you can afford, maintain it carefully, and plan to hold on to it for a decade or more. Ed Welch, an antiques dealer in Winslow, Maine, who has written for publications in the field, says a $5,000 investment probably is the minimum for a quality piece that has a chance to appreciate over time. As an example, he suggests looking for items by Gustav Stickley, who made furniture in the variously named Mission or Arts and Crafts style in the early 1900s. According to items recently offered on eBay, you could get an oak library table or chest of drawers in that price range.
As with antiques, you need to learn about, love, and take care of an investment in oriental rugs. If it would be hard to keep your children or grandchildren off your valuable rugs, for instance, it probably isn't the area for you. This broad term covers hand-woven rugs of natural fibers from the Middle East, Asia, and the Balkans. Collector Steven Price, who taught a course on oriental rugs at Virginia Commonwealth University in Richmond, advises sticking to antique rugs 100 years old or older if you are aiming toward investment. More recent rugs are not likely to be one of a kind-and thus are less likely to be seen as rare and valuable, Price says. He notes that in recent years, Kurdish, South Persian, and Belouch rugs-made in areas of Iran and Afghanistan-have rapidly gained in value.
To start educating yourself, look at the Web site of oriental rug magazine HALI or the online auction catalogs of Skinner's auction house in Boston. If you live near or plan to be in Boston, you might go to a rug sales preview at Skinner's to see the items and get an idea of price. If New York is handier, Sotheby's also sells rugs. Or you might-cautiously-look for a local dealer. Take more seriously a dealer who has primarily antique rugs, Price advises.
Gold tends to rise when the U.S. dollar is falling against other currencies or fears of higher inflation surface.
Unlike handmade or limited edition antiques and rugs, collectibles usually are mass-produced items-like lunchboxes or fountain pens that suddenly become popular with collectors. Some specialties-like baseball cards and other baseball-related items-have had a long bull market that shows no sign of abating. The true moneymaking items have a clear history-a bat or jersey, say, that undeniably was used by Babe Ruth or Mickey Mantle.
More typical is a swift run-up in value followed by a peak and then decline. Maine antiques dealer Ed Welch, who also sells collectibles, notes that: "Ten years ago I could have sold some lunchboxes from the 1960s and 1970s for $300 to $400. Now I would be lucky to get a tenth of that." So-called Depression glass followed a similar trajectory, he says. So unlike other tangible investments, you need to be ready to sell quickly if you think your specialty has spiked. But you can't count on market timing in collectibles any more than in stocks.
Welch's advice about collectibles applies also to most tangible investments: "If you want to collect, collect whatever makes you happy."