(via Economic Times, 24 Sep, 2008) Sanjeev Sinha writes:
Investing in precious stones may seem like a good idea, but is it really such a sparkling venture? This query has over the years baffled investors and analysts alike. For, although the prices of some high-quality precious stones are said to have shown considerable appreciation in recent years -- 150-200 per cent during the last five years -- gemstone investing per se is still considered fraught with risks. And not without any reason.
A majority of experts, in fact, feel the act of buying precious stones is somewhat similar to the act of investing in art. In their view it is best to buy precious gems and stones because you like them and find them beautiful rather than aim to use them solely as a form of investment.
Says Kamal Gupta, chairman and managing director of the Delhi-based P P Jewellers Group, 'Gemstones are a good buy if you are in a mood to splurge. They also carry an additional aura of mystique and are recommended for various star effects on our body. Scientifically, some of them do have a positive affect on blood circulation which gives different results. But, strictly speaking, gemstones shouldn’t be considered for investment simply because they don’t have any resale value.'
Those, however, who see some value in gemstone investing argue that it at least diversifies investors' portfolio. 'Keeping in mind that gemstones are rare and beautiful objects, they generally enjoy good demand and yield good returns over a long period of time. Also, in view of the current volatility in stock markets, diversification in such investment options can minimize portfolio risk as well as losses,' says Ashish Kapur, CEO, Invest Shoppe India. Whatever be the case, let’s first take a look at the various categories of gemstones. In fact, all stones -- precious and semi-precious -- are collectively referred to as gems. The various categories include precious, semi-precious, synthetics and imitations. All very high value and rare gems fall into the precious category.
The regular ones are ruby, emerald, sapphire, pearl, coral, and garnet. Semi-precious are more than 150 in number and are a speaciality of every country. Some of them are quartz, iolite, tigers eye, malachite, kaynite, tanzanite, tourmaline, topaz, spinel etc. Synthetics are the ones that have the same chemical formula and physical properties of the natural gem but are actually synthesised in the lab, while imitations are the ones that are used instead of the real variety and can be made of plastic or glass.
However, not each and every gemstone should be regarded as a potential form of investment, and even if some may look lucrative, they are definitely not suitable for every investor.
Mihir Shah, partner at the Chennai-based diamond merchants N Gopaldas & Co, says, 'Except for really rare, unique gems and where the buyer has bought them from the right source and knows where to sell them back, they’re useless as an investment. Also, unlike a diamond, they wear out naturally if used regularly, and lose their value. So, only if you carefully preserve them, say over 100 years, they will gather antique value, but this can happen with a pair of Reebok shoes too, if they remain intact for that long time.'
Thus, if you have a gemstone which is rare and of high quality, and you know the traders, then it may be a good investment. But not the other way round.
'Besides, prices increase only when the mines become extinct, or the currency varies. If new mines are found, prices crash. Also, I have never heard anyone selling one’s gem,' says Shah.
Sounds strange? 'Definitely not,' says Gupta, 'The use of gemstones is largely culture-based, and in India nobody would like to use a stone if that has already been used by someone.' So where does the question of resale arise?
Also, grading and pricing of gemstones are difficult and require considerable experience and training. 'The gemstone market is highly illiquid when compared to the financial markets, commodities, or even real estate, and different dealers’ valuations may vary considerably,' says Amit Sarup, director, Religare Venture Capital Ltd.
Thus, the act of buying precious stones is somewhat similar to the act of investing in art. No wonder, it is best to buy precious gems and stones because you like them and find them beautiful rather than aim to use them solely as a form of investment.
'One safe way to buy gemstones, however, is to buy them when they have been used in any jewellery. This enhances their value,' says Gupta.
Significant returns may also be realised when an investor buys a large, uncut and coloured stone, and then sells it for a higher price. 'The best stones to buy are the ones that look beautiful when you wear them. Ones that do not wear out fast in time, like rubies and sapphires,' informs Shah.
According to experts, rubies, emeralds, blue sapphires, alexandrites and Basra pearls are a good buy, but preferably they must be over 5 cts and more intense in colour.
Sometimes the country of origin is also important. For instance, Sri Lankan sapphires, Kashmir blue sapphires, Brazilian and Columbian emeralds in their natural untreated form are considered a good buy. Ultimately, it’s the beauty of the stone that decides its value!
http://economictimes.indiatimes.com/articleshow/msid-3522209,flstry-1.cms
I think an educated consumer is your best customer.
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