Investing in Gemstones

A Closer Look at the Pros and Cons
In an article, I read how a rich contractor died owing a large tax bill and didn't have enough cash in his estate to settle it. However, he had a large collection of several hundred colored gemstones. His family, who'd always whined about him spending so much money on his gem collection, decided to send his collection to auction at Sotheby's. A few weeks later all the stones were returned except for three stones, the largest of which weighed less than 1 carat. What were these stones? They were colored diamonds. Sotheby's had sold them to a billionaire for way over a million dollars. More than enough to pay the deceased's tax bill. And what's even more amazing is that the deceased had only spent twenty thousand dollars to purchase the stones on retail. What his estate received was a colossal appreciation in value, wouldn't you agree? This article will investigate the pros and cons of investing in gemstones.


But before I dive straight into this, there's something I want to point out to you. Oftentimes referred to as a dirty term, "investment grade," although not illegal a term, has been used and abused by fraudulent salespeople and is frowned on by the US Federal Trade Commission for the same reason they frown on "precious" and "semi-precious." If you plan on becoming a dealer, don't use this term. It can instantly ruin your reputation. Usually applied to high-end gems, the term investment grade does not necessarily mean the gems are the best investment. Gems that are of lesser value oftentimes appreciate more and are a lot easier to liquidate. That said, the well-informed would invest in low to moderately priced gems.

On average, it is not uncommon to mark-up a low-priced gem five times or more. Whereas you couldn't do that with high-priced gems, profit margins are usually far lower in comparison. Typically, as things get more expensive, the mark-ups tend to get lower. Unlike alexandrite, where a 25% mark-up on a $30,000 piece would be gladly accepted, diamonds, whose market is very competitive, mark-ups can drop below 10%.

When investing in gemstones, the difference between wholesale and retail is your profit - and the greater your chance is of making a profit when you buy low. Not to mention, it is also easier to find buyers for lower priced goods.

In summary: investing in colored low-priced gemstones is the fastest, most assured way to make a profit. Market trends are unpredictable, hence it is advisable that if you're going to buy, buy at a low-as-possible price. Mark-ups on low-priced stones can quite easily exceed five times, but on the high-priced items like diamonds, it can go below 10%. Before making that investment, take a closer look at the pros and cons. Ask questions. Do some research on the current market trends, and be extra cautious. It may take years for your purchase to yield a profit – like it did the rich contractor I mentioned in this article – so make sure, at any cost, that you buy low.

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