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Precious Gemstones Investing
A diversified portfolio is a smart move in any economy. Stocks, bonds and a savings account are standard assets. Some investors include precious metals in their nest egg as well. Investing in gemstones is trickier because it takes knowledge about the stones themselves. There is no public market for individuals selling gemstones like there is for selling company shares. Investing takes common sense, knowledge, access to the gemstones and a safe place to keep them.
Determine how much to invest. Like any asset, determine how much you feel safe in investing in the gemstones. Gemstones are a long term investment rather than a buy today and sell tomorrow investment. The money you invest could be tied up for years.
Decide which gemstones to invest in. Diamonds probably come first to mind, but they're not the only gemstones and may not even be the best investment. Diamonds are controlled by a few large conglomerates who decide what new diamonds will be sold and to whom. Sapphires, rubies and emeralds are not controlled and are probably familiar stones to you. There are other gemstones to consider as potential investments, such as opals, South Sea pearls, Alexandrite and tsavorite.
Understand how diamonds are valued. The four Cs rule value: Carat, Clarity, Cut and Color. Carat is how much the diamond weighs, not how big it looks. Diamonds that are heavier, don't have flaws visible under 10x magnification, are blue white, and perfectly cut are worth more than diamonds with flaws that are visibly yellow with a less than excellent cut. The difference may be $50,000 or more for the same weight diamond.
The exception to the rule of diamonds being more valuable when they color is closer to blue white are colored diamonds, called fancies. Fancies are rarer and more valuable than white diamonds. The Moussaieff Red Diamond, weighing only a little over 5 carats sold for $7 million dollars. Fancy diamonds naturally occur as pink, vibrant bright yellow, blue, violet and even green.
Understand how colored gemstones are valued. Colored gemstones are valued based on their depth of color, carat, clarity and cut and how rare the gemstone is. Rubies, or red corundum, is much rarer than amethyst and valued at a thousand or so times per carat. Don't assume that because a gemstone is a certain color, blue for example, that it's a certain stone: sapphire. Blue stones are sapphires of course, but so are topaz, spinel, beryl, tourmaline, zircon and iolate, each having very different values. Sapphires also come in red, known as rubies, green, yellow, pink, purple and white.
Buy from a reputable dealer. Gemstones are offered for sale by individuals, on the Internet and directly from the mines. Unless you're an expert certified gemologist experienced with valuing gemstones, it's easy to get ripped off when buying from anyone other than a reputable dealer.
Keep the gems safe. That may mean in a bank safety deposit box rather than at home. Gems are very transportable. A million dollars worth of diamonds fits in your pocket. If you've had the gems set to wear in a ring or bracelet, once they're removed from their setting, they're difficult to identify. Wearing the gems shows people that you own them. That may open you up to the possibility of being robbed.
Keep in mind you want to buy at the wholesale price not the retail. Don't go to a jewelry store, even an upscale retail store, to buy investment gems. Buy loose gems.
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Dee Power & Brian E. Hill
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