In this article, I will share with you some info about the world of precious stones/gems, especially regarding the advantages and disadvantages of investing in precious stones. A lot of investors choose precious stones as an alternative investment. In addition to their beauty, precious stones and gem jewelry pieces also have their own image/class for the wearer. From my experience from 2006 to 2016, the price trend of the purchase of precious stones themselves in their home countries, for example, Sri Lanka, it was increasing from time to time.
This is influenced by 2 main things:
1. USD exchange rates have increased over time.
2. The level of demand for gemstones is getting higher from international countries.
There are some advantages in choosing precious stones as an investment, such as:
# 1 Prestige
Gemstones are proven to have their prestige. Only certain classes of people are brave and willing to buy, collect, and invest in gems because of their exclusivity. Therefore, they are demanded by a lot of rich people in the market.
# 2 Storage efficiency
The precious stone or gem collectors see this investment facility only requires a small storage space. Imagine millions of dollars worth of gemstones is only in the form of a ring with the size of a thumb, which can be stored pretty easily.
Compare with saving billions in the form of gold bars, paintings or other exotic investment instruments, they can be harder to be stored safely.
# 3 Prices are directly proportional to USD
The price of gemstones themselves follows the USD trend in purchases in their home countries. For investors who like USD investment instruments, the price of gemstones is directly proportional to the movement of the USD so there is no exchange rate risk.
# 4 It can be used as jewelry
This is the one thing that clearly cannot be done with gold bars, paintings, or properties.
# 5 You may use your gemstones as gifts for others
It can easily be used as a gift for personal or business relations.
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Here are some disadvantages of choosing precious stones as an investment:
# 1 It doesn’t have a benchmark price
In contrast to gold and diamonds that already have benchmark prices internationally, precious stones are still traded at subjective prices. Investors must be observant in estimating the fair price of a precious stone.
Over a course of time, investors will better understand the price standards of precious stones/gems by considering various factors.
# 2 Lack of liquidity
It’s because gemstones do not have a special market, precious stones cannot be traded at the right price in the ordinary market. You have to be patient in making sales and when you want to find the right community.
Aside from those things, there is a very important thing to do at an early stage of your gemstone investment. If it’s possible, you must find an honest discussion partner who understands the world of precious stones and that partner must have enough experience in this type of investment.
Why is that? It’s because this is effective to minimize the risk of being deceived when you buy precious stones. In my experience, there were quite a lot of “learning fees” that I have spent to get to the right understanding. Discussing with the right friends will certainly reduce the potential for large “learning fees”.