Are Gems Good Investments?
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Well, in the opinion of this gemcutter/Graduate Gemologist,
there are two correct answers to this question:
- No. If you think you can buy any gemstone
today and sell it in a year or five years or ten years and make
a profit on it, you are probably going to lose money. If you do
not have sufficient savings and more normal investments, speculating
in gemstones or other collectibles is not for you. The gem market
poses several major problems for the small investor/speculator.
First, when you buy a stone, it can be difficult to know exactly
what you are buying, as there are many clever gem substitutes
and enhancements, many of which
are difficult to detect, even for experts. Grading and pricing
of gemstones are also difficult and require considerable
experience and training. Then, when you try to sell a stone, it
is often very difficult to find a buyer. The gemstone market is
highly illiquid when compared to the financial markets, commodities,
or even real estate. When everyone is looking to buy low and sell
high, the spread between bid and ask prices is usually very high.
Jewelers often sell stones for 2-3 (or more!) times their cost,
but they are unlikely to buy stones from the general public for
more than half their normal wholesale cost (i.e., they may buy
a stone at a regular wholesale cost of $100, sell it at retail
for $200-300, but only buy it back from an individual for $50).
If you can find a retail buyer, they will be very unwilling to
pay a normal retail price and will want to pay wholesale prices.
Clearly, buying at retail prices and selling at wholesale prices
is not going to make you any money.
- Maybe. If you can buy stones at true wholesale
values (if you can eliminate as many middlemen as possible), if
you can be assured of getting what you pay for, if you are careful
in picking high quality stones, if you are patient, if you can
find ready buyers willing to pay somewhat more than wholesale
but less than retail prices, if you are lucky, if you have a lot of
knowledge about the stones and the marketplace, then you might
make a handsome profit. If you are able to buy rough stones and
cut them yourself, your chances are considerably improved. If
you can deal in some volume rather than an occasional stone here
and there, your chances are also improved.
If you do have more traditional investments, enjoy gemstones,
and want to buy gemstones on a speculative basis, here are a few
- Buy the best stones you can find. If you
like the color, clarity, and size of a stone but are less than
excited about the cut, consider getting a good gemcutter to do
some minor recutting to make a more attractive and unusual gem.
- Never buy stones encased in plastic. You
must be able to examine a stone under magnification and to test
its refractive index, specific gravity, and other characteristics
so that you have a positive identification of the material.
- Find a good gemologist whom you can trust
to advise you about purchases. If your "gut" reaction
to a gem salesman is negative, be very, very cautious. If you get an
unsolicited "cold call" for gem investments, HANG UP! Just
in case you didn't get that message, let me repeat it: If you get an
unsolicited "cold call" for gem investments, HANG UP! My
own motto is "NEVER buy anything based on telephone solicitations." Believe
me, that can save you a bundle of money!
- Learn as much as possible
about gemology. Ignorance is very expensive.
- Be patient. Top quality stones at reasonable
prices are difficult to find, as are willing buyers of stones
you wish to sell.
- Take advantage of good opportunities. Many gemstones do
not have steady supplies and appear in the marketplace only sporadically.
A pocket of crystals is found on occasion and may
temporarily "flood" the market, and then the supply dwindles until another
deposit is found. A prime example of this is alexandrite -- a good find in
Brazil a few years ago temporarily released many new stones into the market,
but supplies otherwise are scanty.
- If you intend to use your gems in jewelry, be sure the jewelry
is wellmade and designed to protect the stones and care properly
for it, and be sure your jeweler is knowledgeable about the stones
to be used. Don't let some two-bit hack damage your stones through
ignorance. Get an expert jeweler.
- Take good care of the gemstones that you have. If
you do somehow damage them, see if a good gemcutter
can repair them.
- Some gem "investment" dealers offer buy-back guarantees.
Inquire carefully into their history and be skeptical of any promises,
as very few of them hang around long enough to deliver on their
promises. Remember -- if it sounds too good to be true, it probably is.
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