Hang On to Grandma’s Wedding Ring, or Sell It and Put Down on a House?

Q. In the process of cleaning out my drawers the other day, I came across a diamond I received 18 years ago after my aunt passed away. It was my grandmother’s wedding ring. I decided to have it appraised so I could insure it. It turns out to be worth $30,000! Part of me thinks I should wear it as a reminder of my grandmother and aunt, even though the insurance would cost $400 a year. The practical side of me says this is a down payment on a house. I want to use it in the way they would want, but they are not here to ask. What do you recommend?

*

A. You probably could figure out what they would have wanted by remembering what they told you about money and possessions.

If they were fearful about money in general, they may have felt you should hang on to the bauble for a rainy day. If they considered themselves caretakers of money and of family heirlooms, they may have wanted you to pass the ring along to another family member. If they were the kind who always put people ahead of possessions, they may have urged you to sell the ring and buy the house.

But, as you say, they’re not here to ask. The real issue now is what you want to do.

Jewelry typically does not appreciate as much in value as real estate or financial investments such as stocks. In a purely financial sense, it’s often a “dead” asset, tying up money that could get greater returns elsewhere.

On the other hand, jewelry is extremely portable, which can come in handy if you need to sneak out of the country in the middle of the night. Jewelry can also, as you’ve discovered, carry considerable emotional weight. If you’re a caretaker type yourself, you may feel a duty to keep the ring in the family, especially because it’s already been handed down twice.

But the ring is yours in every sense. It’s up to you to weigh the issues and make your decision.

If you do plan to keep the ring and wear it, definitely get the insurance. Many people do not know that their home insurance policies have extremely limited coverage for jewelry. A floater policy that covers the ring could spare you some agony should it be lost or stolen.

If you decide to sell the ring and buy a house, you could thank your departed benefactors by prominently featuring some nicely framed portraits of them. That, and the house itself, would serve as your reminders.

Lessons From History

Q. I cannot believe you would even suggest, as you did in last week’s column, that a 10-year-old invest in a fund that includes bonds in any significant way. Even if we were talking college, your advisee is seven to eight years away. I don’t believe any downturn in equities in recent history has lasted that long. If he is interested in funds to buy a home 10 years hence or retire 50 years hence, bonds are absolutely out of the question.

A. My, my, what short memories we have.

It actually took the Dow Jones industrial average 25 years to return to its pre-1929 peak, and a decade to recover completely from the 1973-74 bear market. Investors in Japan have been waiting for 10 years for their stock market to recover after it plunged by more than half from its 1989 peak.

It’s become trendy to recommend all-stock portfolios for anyone with a time frame of more than five minutes, largely because we’ve had such an extraordinary bull market in stocks this decade. And theoretically, based on the trends of the past, with a long enough time horizon, stocks should be the only way to go because they do tend to outperform every other investment class.

If only we didn’t have human nature to contend with.

Few of us could actually stomach watching half or more of our investments disappear. That’s where bonds come in handy. The income stream they provide serves as a buffer when stock markets go south. That’s not to say the stocks/bonds combination works perfectly; check out 1994, when stocks were essentially flat and bonds suffered their worst drop in decades.

But history does tell us that diversified investors tend to be happier investors. Diversified means spreading your money among different asset classes--stocks, bonds, cash and real estate. While you might be OK with just breaking even after 10 or 20 years, most investors want to see some gains in their portfolios over time.

*

Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.