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Interesting Investments: Gemstones

What makes a gemstone an actual investment, rather than just a pretty piece of jewelry.
Avery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.
Avery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.

Diamonds, as the saying goes, are a girl’s best friend. Clever marketing, to be sure, but diamonds are both unethical – think blood diamonds – and also not the best investment. If you are going to invest in jewelry, it’s far better to go with another precious stone. But not just any stone will do. Let’s look at what makes a gemstone an actual investment, rather than just a pretty piece of jewelry.

Size and Cost

Not all gems are created equal. But even rare gems don’t always make for a great investment. Chances are, you are going to want a gem that is at least 2 carats, and you don’t want to pay retail price. The key is to have profit already built in — this means private dealers, or buying unrefined gems. You will be looking at spending at least $3,000 on a given gem. The origins of the stone are important, as well. For example, a Burmese ruby is the most valuable of rubies, though rubies from Madagascar, Mozambique, and Tanzania are seeing their values quickly rise.

Auctions are also not the best place to look for a rare gem. You’ll need to find your own buyers. Primary dealers and wholesalers will be the ones to look for, particularly those who mine or cut the gems themselves. The Gemological Institute of America offers a number of buying guides for specific gems.

You can also search pawn shops, but this will take an immense amount of patience, in addition to the patience required for gems to accrue profit. You might, on rare occasions, be able to actually find a diamond in the rough.

Otherwise, you’ll want to go to the other end of the spectrum: the rarest gemstones possible. These, however, are not likely to be seen on the open market, and are mostly found only in private collections by private owners.

Avoid diamonds for a few reasons. First, they are unethical, as slave labor has famously been used to mine diamonds (hence the term “blood diamond”). Given that ethical and sustainable businesses attract customers, and diamond mining is famously unethical, it would be good to stay clear. Plus, DeBeers also has a near-monopoly on diamonds, and thus control the prices. It’s better to just not compete and go with other gems if profit is your goal.

There is one caveat to diamonds, but it involves finding them yourself. Metal detectors can help you find indicator minerals, like gold, that can lead to diamonds or other precious gems. Finding them yourself, and not relying on what amounts to slave labor is ethical, and can be profitable.

Adding Value

The best ways to add value to a gem are changing the polish and cut, and turning loose gems into jewelry products.

Recutting the gem can add value, depending on the cut, or it can utterly destroy the value. But, a rough gem, bought at a low price, and turned into a polished gem with markup to account for labor, can turn a good profit. The optics of the cut matter, as well — the prettier the gem, after all, the more desirable it is, and the higher the price.

Settings matter, as well. There’s a larger market for gems in a setting than for loose gems. This could be the difference in selling the gem, or having it sit as inventory.

Stocks

If all of this sounds like too much work — and to be sure, gaining profits from precious gems can be a lot of work — you could always go the easy route and invest in stocks and ETFs. There are plenty of gold and silver ETFs, and quite a few that feature diamonds, as well. For the most part, you will want to target mining ETFs — and if you can avoid those with diamond mines, all the better. Be warned that this could be even slower than actually buying and selling the gems yourself, but it is certainly more hands-off.

It’s a lot of work, make no mistake. But dealing in rare gemstones can turn a tidy profit if you know what you are doing. They are great long-term investments, as mines can dry up (such as the mines for Kashmir sapphires) and cause prices to skyrocket. The key is to be patient and to improve on the value of the gem in any way you can — while making sure that the initial purchase is a good one. And, if all else fails, you’ll still have a gem for a piece of jewelry.