I had a thirty year career as a financial planner and investment advisor so I have some experience to draw on when it comes to investments. The recent increase in the price of turquoise presents the question as to whether turquoise is a good investment. Let me answer right up front. Buy turquoise, natural turquoise as a cabochon or in jewelry, because you love it and it gives you pleasure to wear it. If it happens to increase in price over time, as it has done recently, that is an added bonus.
Investing in hard assets presents several challenges. First, they are not liquid, meaning they are not easily converted into cash. A stock or bond traded on an exchange may be quickly sold for cash. Selling turquoise requires more time and effort.
Second is the spread and transaction costs. The spread is the difference between what the seller is asking and the price the buyer is willing to pay. Think of real estate. Transaction cost for a stock may be pennies but for turquoise you may pay as much as a 40% commission to the dealer with whom you consign your turquoise for sale. You may sell yourself but that requires time, effort and it is difficult if you do not have a recognized brand.
Third, turquoise is a two-tier market with most sold being treated stone selling for a fraction of the price of natural. Finding an educated consumer who understands the value of natural is often difficult. Also, turquoise has only one commercial application, in jewelry and the whims of fashion are fickle. There was a turquoise boom during the 1970’s which saw prices increase dramatically only to fall off during the late 70’s and into the 80’s. The time period during which you own the turquoise may see increase in price, no increase, or even falling prices.
An example of possible return may be helpful. In 2014 I purchased a number of gem grade Bisbee turquoise cabs from Bruce Mead for $100 a carat. Ten years later, during a period where prices for high grade turquoise have risen, I have sold several of these cabs for $200 a carat. Over the ten-year period that is an annual return of 7%. Other investments have done better including the stock market.
Lets expand the analyses with a hypothetical example. Assume you bought the same turquoise forty years ago for $10 a carat and sold for $200. Sounds like a dramatic price increase but the annual rate of return is about 8%. What this indicates to me is that turquoise remains relatively underpriced compared to cost of extraction and future price increases may be expected, assuming constant to increasing demand and steady to decreasing supply of high grade natural turquoise.
Bottom line, buy turquoise because it is a magical stone that will provide you with a sense of health and happiness. That is the return and, in my experience, that far surpasses any economic advantage.
Mike Ryan II
Santa Fe
July 2024
Comments