With the price of gold sky high and stocks down some people are looking to gems for investment. This is a great idea but much more difficult to execute than other investment strategies. Nevertheless gemstones have great potential as an investment.
For the same reason Gold has been an excellent investment, gemstones can be as well. Gems are rare. Gems are mined and every mine has a limited supply. Gems have value not only for their beauty but many also possess physical properties that are valuable to science and industry. Gems have proven that they can increase significantly in value over time as supply decreases or demand increases. These are tantalizing factors that inspire people and organizations to invest in gemstones. Most of these investors make money but many are disappointed with the risks and profit margin. Most of these investors are also investing millions of dollars and our discussion today is about gemstone investment of a much smaller scale.
There are some significant differences between gemstone investing and other common investment commodities. Gold and Silver for example have very strict criteria for the product. We know exactly what 100% Gold is and this can be verified relatively easily beyond dispute anywhere in the world. Gold can be melted or reformed and it still has basically the same value. Gold is traded publicly so there is always a market for the product. This is not the case with gemstones. Let’s tackle each of these problems and see where it leads us with our investment decision.
VERIFICATION
The industry basically utilizes two methods for verification of gemstones; independent laboratories, and gemologists. The cost for certification by an independent laboratory is high for 99% of the gemstones in the market, so most gems are verified by trained experts that work for your gemstone supplier. The in house expert does have a conflict of interest, but for the most part the risk of incorrect identification is low. Just be sure to buy from a company that you trust, has shown years of stability in the industry, and is willing to provide a guarantee. However, there are high value gemstones that merit having a certification from an independent laboratory and having this documentation will help increase the value of your investment. Reputable companies will be willing to pay for the certification and refund your money if the gem does not certify as described (or better). For most gems an invoice describing the gemstone is satisfactory.
GEM STANDARD
This is basically impossible with gemstones. No two gems are exactly the same and purification (like you could do with Gold) is completely unacceptable. The closest thing we have to a gem standard is the grading system developed for Diamonds. No grading system exists for colored gems that is agreed upon worldwide. There is near agreement on qualities and values worldwide, but no method to describe them. Photographs have helped somewhat but to this day the only way two experts could agree on quality and value is to both physically see the gem. This creates a difficulty in making investments in colored gems. It adds to the trust you must have in your supplier since now you are not only depending on them to identify the gem accurately, you depend on them to provide an accurate quality grade and relative value. Reputable dealers will have a generous buy back policy to protect your investment from any inaccuracies in quality or value. Ask your supplier if they have a buy back policy. [ Optima Gem’s policy provides you protection for up to 10 years. We are so confident in our products’ value and accuracy of description that we provide a 100% credit for a full year. ]
READY MARKET
This may be one of the most difficult aspects of buying gems for investment. How do you cash out? It is not easy since gems are not publicly traded like Gold or stocks. Here is what I suggest.
Once you decide on a supplier you trust (which includes having a product guarantee and buy back policy), ask about the possibility to use them as your selling agent when you decide to cash out. Individuals trying to sell to a local jeweler or dealer are asking to take a huge loss. It won’t help you if your gems have increased in value if you can’t find a buyer in a timely manner. Most dealers offer at 10cents on the dollar or less. This offer price will increase significantly if you can provide an independent laboratory certification for your gems, but still may not be enough to recover your investment. If you chose your supplier wisely, they will be motivated to buy your gems at a fair price or at least offer to sell them for you.
ADDING VALUE
Everything we’ve discussed has been considering loose stone investments. One sure way to boost your profit potential is to add value by putting your gems into jewelry. Not only do you get an immediate boost in value, a well thought out unique design that will withstand years of style changes can multiply your potential profits. Don’t forget that Gold and other metals are likely to go up in value too in the future.
BOTTOM LINE
Don’t try investing in gems on your own unless you have tons of time to research. If you think stock investing is challenging without expert advice, gem investing is 10 times that. Pick one or two suppliers you trust and let them help you. If they know you might be selling the gems back to them 10 years from now, you can be assured they will pick some gems they will welcome back. Be sure to provide your kids with the supplier information so they will know where to go to get the most out of your effort.
ENJOY THEM
Display and enjoy them as much as you can. The enjoyment of owning a rare and beautiful product of nature is a daily dividend for your investment.
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