Precious objects are items that are generally small in size but highly valuable in monetary terms. The important precious objects are:
1. Gold and silver
2. Precious stones
3. Art objects
Gold and Silver:
Gold and silver, the two most widely held precious metals, appeal to almost all kinds of investors for the following reasons.
1. Historically, they have been good hedges against inflation
2. They are highly liquid with very low trading commissions
3. They are aesthetically attractive
4. They posses a high degree of ‘moneyness’
A substance possesses moneyness when it is (1) a store of value. (2) durable (3) easy to own anonymously, (4) to subdivide into small piece that are valuable (5) easy to authenticate and (6) interchangeable that is homogeneous or fungible
As against these advantages investment in gold and silver has the following disadvantages.
1. They do not provide regular current income
2. There is no tax advantage associated with them
3. There may be a possibility of being cheated
4. Due to the softening of their process, gold and silver have not kept up with inflation in recent times
Diamonds, rubies, emeralds, sapphires and pearls have appealed to investors since times immemorial because of their aesthetic appeal and rarity. Diamonds in particular, have attracted interests because of their high per carat value. The quality of a diamond is basically judged in terms of the 4C’s viz carat color cut and clarity.
While precious stones may have appeal of the affluent investors and those who have skill in buying them. They are not suitable for the bulk of the investors for the following reasons:
1. Precious stones can be very illiquid. It may not be easy to sell them quickly without giving major price concessions.
2. The grading process by which the quality and value of precious stones is determined can be quite subjective
3. For investment purposes, larger precious stones are suitable. Most investments grade precious stones diamonds in particular require huge investments.
4. Precious stones do not earn a regular return during the period they are held. On the contrary, the investor has to incur the cots of insurance and storage.
Objects which possess aesthetic appeal because their production requires skill, taste, creativity talent and imagination may be referred to as art objects. According to this definition, paintings, sculptures, etchings and so on, may be regarded as art objects (Some of these objects thanks to their historical importance are classified as antiques) The value of an art object is a function of its aesthetic appeal, rarity, reputation of the creator, physical conditions and fashion. A brief description of the more commonly bought objects viz., paintings and antiques are as follows:
Paintings appear to be the most popular among objects of arts. In the last decade or so, interest in paintings has grown considerably thanks to the substantial appreciation in the market value of painting of Hussain, Raza Menon, and others.
If you have an inclination or buy paintings bear in mind the following guidelines:
Put your bet on more fledging painters: Works of established painters may be too expensive and beyond your reach. More important is the expected appreciation in their value may not be considerable. Hence, it makes more sense to buy good quality paintings done by fledging painters – the potential Hussains of tomorrow. True, when you bet on an emerging painter you are taking some risk. Often, the potential rewards justify such risk. As Pritish Nandy critic and art lover says buy small work at low prices. Enter the big league only after learning about the market and the art. Keep changing your portfolio. Avoid hyped works and artists.