With the development of global luxury goods and collectibles markets, investing in rare and valuable gemstones has become an increasingly attractive option for investors seeking alternative assets and portfolio diversification. Gemstones like diamonds, rubies, emeralds and sapphires have shown tremendous growth in value over the past decades. For example, the price of high-quality pink diamonds has risen over 150% in the last 10 years. The potential for high returns and gemstones’ intrinsic value, scarcity and portability make them a sound long-term investment choice.
The surging demand for rare gemstones among collectors and investors
The collectible gemstones market has exploded in recent years, with major auction houses reporting record sales of extremely rare and unique gemstones. In 2017, an ultra-rare 59.6 carat Pink Star diamond was sold at a Sotheby’s auction for a record $71 million to renowned diamond collector Chow Tai Fook. Such sales indicate that there is tremendous appetite among ultra high net worth individuals for acquiring one-of-a-kind gemstones as collectible investments and capital preservation tools.
Why gemstones represent a unique alternative investment opportunity
Gemstones possess intrinsic value due to their scarcity, beauty and durability. They have stood the test of time over thousands of years. Rare gemstones with exceptional color, clarity and carat weight can appreciate more than 500% in value over a decade. At the same time, common gemstones offer stability and downside protection. This makes gemstones a unique asset class that can enhance portfolio returns while mitigating risk through diversification.
How investing in gemstones compares favorably to stocks, bonds and real estate
Though past performance doesn’t guarantee future returns, precious gemstones have historically performed well as an asset class during periods of economic instability and high inflation when stocks and bonds struggle. For example, between 2005 to 2010 following the global financial crisis, the median price per carat of high quality loose diamonds increased around 15% annually compared to flat or negative returns for stocks. Gemstones also require lower initial investment than real estate. An investor can purchase a high quality 5 carat ruby for around $500,000 while a comparable $500,000 real estate investment would require financing.
Best practices for properly investing in rare gemstones
The first step is engaging an independent appraiser to evaluate potential gemstone investments and provide fair value estimates. Reputable jewelers and established auction houses like Sotheby’s and Christie’s with specialty departments can fill this role. Investors should focus on color, cut, clarity and carat weight – the four Cs – when assessing gemstones. Proper documentation like GIA certificates providing standardized grading reports are essential. Portfolio allocation to any alternative investment like gemstones should be limited to 5-10% to mitigate risk.
With strong historical returns and immense growth potential, investing in rare and valuable gemstones can be extremely rewarding for investors seeking portfolio diversification and an inflation-resistant asset. While risks exist, proper due diligence, trusted partnerships and reasonable allocation allow for sizable upside with limited downside.