Read this even if you don't write fantasy, SF or spec. fic. What those genres do explicitly, other genres do figuratively — or vice versa, depending on how you look at it.
In role-playing games, magic items are coveted objects of artifice or divine origins which enable the possessor to wield great power of various types. Players will go on quests to obtain them, or be rewarded with them.
As such, in gaming, balancing magic items is all about ensuring that players do not get granted Fabulous Godlike Powers, but rather are given a small advantage over enemies who would otherwise be on par with them. The Gamesmaster has to judge quite carefully what magic items players will obtain and when.
Players will note that a really crafty Gamesmaster will sometimes throw in a magic item that has a downside. It could be as simple as a curse, as annoying as a geas, or maybe even that the magic item, while powerful is not especially useful, or while useful is not quite powerful enough.
In a story, the situation is different from in an RPG. In an RPG, the players have to use their imagination, ingenuity, knowledge of the game and luck to come up with solutions to tricky situations. In a novel, the reader is following or discovering the line of a story, and the author's duty is to provide reader satisfaction.
In a story a powerful magic item is useful as a McGuffin (everyone is chasing after it, but noone actually uses it), or as a Doomsday Device (the Big Bad has it and is fixing to use it). If a protagonist has it, however, reader satisfaction rapidly wanes.
A magic ring that makes you invisible but not silent is great as long as both of those features are worked into the story together. If such a ring later turns out slowly to enslave its user... I guess you know what I'm thinking of.
A magic ring that makes you undetectable and invulnerable is called a "ring of drama killing"
A magic ring that makes you completely undetectable and invulnerable to harm, however, soon becomes annoying. The reason is that it destroys Drama.
Drama can be hard to pin down, which is a good thing. When it is pinned down it often becomes banal and even irritating. This is what soap-operas (and long running US "drama" series) do. They create Drama using the simplest known formula: the characters do things that the audience knows that the characters should not do.
But suppose even in this debased and degraded drama, you give the main character a Ring of Absolute Blamelessness. All he has to do is slip it on, and the Universe reorganizes itself such that whatever happened was none of his doing. The Drama evaporates without so much as a puff of smoke.
Supposing your main character is a Thief who gets his hands on the aforementioned Ring of Undetectability and Invulnerability. Thievery is rather going to lose its excitement, not merely for the reader but also for the author and for the character!
All this can go awry in another way entirely; the way that leads to madness rather than boredom.
Supposing my Holy Warrior obtains the Sword of Ultimate Cleaving, that can cut through even the bonds of death itself. Unfortunately his enemy obtains the Shield of All Defense which is the only thing that can resist the Sword of Ultimate Cleaving, so our hero has to obtain the Amulet of Irresistible Piercing which enables him to get through any magical defense but his enemy gets his hands on the Helm of Amulet Immunity which etc, etc, etcetera.
Walk away quietly.
In a story you have a fine line to walk. A magic item must be essential, but at the same time it mustn't do more than give the character the smallest extra edge, and he must have his own skills and strength of character to back it up. Think of the spell imagined by PTerry which keeps you alive only as long as you don't think you're invulnerable. Think of the superpower of being able to turn invisible only if you are completely naked and everyone is looking the other way.
In a story, you see, magic is always a symbol. Usually it is a symbol for power and how it is obtained, but it can be many other things. As soon as a magic item transforms mild mannered Will the Goatherd into Super Billiam, it has become a cheap device for wish fulfilment and will do the worst thing that any device can do: make it too easy for the author.
When the story is too easy for you to write, you will write crap.
That's probably the most categorical you'll ever hear me be, because so far it is the only sure rule that I have found for good writing.