Unlike mutual funds or stocks, gemstones don’t pay dividends and may take years to appreciate to justify the buying costs. They are easy to buy but hard to sell and any dealing with precious stones requires expert knowledge and certification from a reliable authority.
On the other hand, gemstones continued to be a part of many investor’s portfolios for centuries and are looked at as solid investment. Let’s take a closer look at what makes them so appealing despite low liquidity and highly complicated market.
Why Investing in Gemstones
The gemstones have all the qualities most investors appreciate: they are holding their value and appreciate with time, being rare, durable, and relatively easily transferable. What is more, you can always take them wherever you go. There is no other way to carry several million dollars just in your pocket.
Gemstones are hard assets in the sense that they never become worthless no matter what as compared to stocks and other financial assets. Top-quality, rare gems are always in demand even during economic slowdowns or major crises. Unlike art, gemstones are not subject to potential buyer’s likes or dislikes. They don’t require maintenance and are hard to damage.
What are the Gemstones?
Until recently, all gemstones were classified as precious and semi-precious stones, with the former including only rubies, sapphires, and emeralds.
In the late 30th, De Beers mining conglomerate has taken an unprecedented marketing campaign which was so successful that it made three-quarters of American brides consider diamond engagement ring as an indispensable part of their marriage. After that, all gems were divided into diamonds and colored gemstones, although some of the former can be bought for less than $100.
Today, this classification is still in use, and the term “semi-precious stones” is generally avoided as prices for some of them, such as alexandrites, tourmalines, or black opals, can easily outpass those of diamonds. Meanwhile, the Big Trinity of rubies, sapphires, and emeralds still stands out and is preferred by high brand jewelers, collectors, and investors, among other colored gemstones for their top price and rarity.
Mentioning diamonds as investment stones can make some gemstone collectors and investors frown for several reasons, with one of them being that fact that until recently they were not even classified as precious stones until massive marketing in the U.S.
Some would say that diamonds are not that rare and are not the most expensive, which is especially true for smaller diamonds, some of which you can buy even for $20-$30 apiece.
Still, considering the size and the development of the diamond market, offering wide opportunities for resale, not mentioning diamonds would be hypocrisy. Opposite to the opinions above, some view diamonds as the most secure and predictable gemstone investment due to the availability of strict standards and charts to assess their value.
With red being the most prominent color, it’s no wonder that rubies come at the top of the Big Three of precious stones. As it goes with most of the gems, the origin plays one of the critical roles in determining the price. As for rubies, the ones from Burma of distinct pigeon blood color are the most valuable. Although rubies do not have such a big market as diamonds, many investors note their higher return on investment once the buyer is found.
These are considered the benchmark for the blue color. Other blue gemstones do exist, but it is cornflower-blue Kashmir sapphires, which set the standard. Sapphires also go in different colors with green ones being at the low end and padparadscha or salmon pink ones at the high end of the spectrum, sometimes priced for more than $12,000 per carat.
During the last decades, there was a lot of fuss around emeralds due to a new practice of treating them with oil or resin to enhance color. Still, high-quality, untreated emeralds are considered a safe investment, and they are quite rare too. Most valuable emeralds have bluish to pure gree color with minimum fractures and impurities. Most of such emeralds come from Columbia, which stands for more than 50 percent of the world’s total emerald market, followed by Brazil and Zambia. Columbian emeralds are well-known for their warm and saturated green hue, larger sizes, transparency, and clarity.
Other Colored Gemstones
The list of colored gemstones outside the Big Trinity is quite extensive. At present, the term of semi-precious stones is no longer synonymous with a lesser value as prices for Russian alexandrites or Paraiba tourmalines can exceed $10,000 per carat. Other gems, such as Tanzanian spinels, African garnets, or Burmese jadeites are also looked at as alternative investment gems due to the less regulated market and opportunities to buy low and sell high.
When Gemstones Can Be an Investment
There are certain conditions for turning a gem purchase into an investment such as a minimal budget required to have the stone appreciate over the years. Buying lower quality or smaller gems may exclude any chances of price growth, so it is important to exceed the minimum threshold.
Purchasing price is even more critical for a successful investment as getting a stone in retail with markups above 100 percent excludes an opportunity to resell with a profit. As an average buyer can’t buy from wholesale vendors, going for pre-owned gems from auctions and other sources may be a more promising alternative. Finally, any serious gemstones deal shall always be accompanied by a full document package, including certificates from internationally recognized institutions, such as the Gemological Institute of America (GIA) or American Gemological Society (ASG). As GIA and ASG certificates are issued only for larger stones or maybe unavailable under the circumstances, the importance of having a trusted local expert to pre-evaluate a stone cannot be underestimated
Where to Buy Gemstones?
Some time ago, an idea to get a gemstone, worth several thousand dollars, from online vendors would sound weird at the very least. Today it is a widespread practice as online stores are increasing their part of the sales, cutting inventory costs and margins.
The list of online platforms selling diamonds and gemstones is endless and sometimes hard to navigate. When buying diamond jewelry in the U.S., you have most certainly heard of the Blue Nile and James Allen, which pioneered the industry a decade ago. With colored gemstones, finding reliable stores would require more research as the market is less regulated, and there are a number of players.
Nevertheless, if your budget for this purchase exceeds several hundred dollars, it is advisable to see a stone in persons. A stone, declared as having no defects and inclusions, may look like ice when seen by a naked eye. Gemstones, having the same characteristics, may look different in reality. Finally, the color of gems on a computer screen would be different from the real color in most cases due to screen settings and light conditions.
Thus the best approach to find a reliable vendor would be to look for reputable stores having a physical presence in your country, providing certificates and all the documents for each of their stones as well as having a trustworthy return policy if it exists. Returning a stone from overseas and recovering funds from online stores without physical presence may turn out impractical.
Gemstones offer diversification of investment portfolio, being hard assets whose value remains comparatively stable and grows over the years. Their portability makes them one of the best means to store money if they are kept for an extended period of time.
Today, diamonds, including colored diamonds, as well as Big Trinity of rubies, sapphires, and emeralds are still considered safe investment vehicles although so-called semi-precious stones may also offer sound opportunities to make a profit. At the same time, buying semi-precious gems requires a more in-depth understanding of the market and expertise with precious stones.
As in the case with any resale, purchasing below the market value is the only guarantee of future profits, which is most often beyond the access for an average buyer. In case of gems, any deal shall be supported by a reliable expert evaluation and a full document package which makes buying gemstones privately even more complicated.
At the end of the day, gemstones do have their name for a reason and just owing them for the pure pleasure or presenting to your precious ones is sometimes more than enough to justify the decision to buy. Meanwhile, when combined with an understanding of the market, low buying price, expert evaluation, and intention to keep for a considerable period, buying gemstones can be not only a luxury but also a great investment decision.