Making Money
  ... You can make money investing in gemstones. As with any investment, you need to be knowledgeable and exercise a good deal of caution and common sense.
 ... As a rule, gems increase in value at the rate of inflation. Of course, there are always exceptions. One good example is blue topaz. They used to be rare and demanded a fine price. When the method of transforming common white topaz into blues became common, they suffered a considerable drop in value. Another notable exception is tanzanite. After the primary source closed, it skyrocketed in value.
 ... These represent exceptions to the rule. Lacking the means to predict the future value of a gem, your best strategy is to buy as low as possible.
 
 Buy Low and Sell High
  ... You cannot pay retail for a jewel and expect to sell it for a profit in a few years. Buying low means seeking out wholesale sources. Do your homework. "Primary" dealers mine and cut the stones themselves. They have the best prices. Secondary dealers buy from other wholesalers, (usually primary dealers,) and resell them, still well below retail. In addition, you will get a better price by purchasing lots than single stones. Currently there are some good sources on the Internet. There are wholesalers in most cities and listings for them in the trade magazines.
 ... If you are knowledgeable enough, you can shop for preowned gems at flea markets, pawnshops, and estate sales. Sometimes you can find gems considerably below current values. You must have the expertise to identify gems, distinguish between natural and synthetic stones, and be prepared to do a lot of legwork. Some people get a thrill from the hunt and greatly enjoy this method.
 ... Your investment concerns need not be restricted to cut stones. Rough gems, mineral specimens and finished jewelry all hold potential for investment. Each of these is specialized, so you should focus your attention on the one that interests you most.
 ... Selling the gems for a profit is the second consideration. Jewelry stores are a likely source, as are auction houses and online auctions. Note that, unless you own a business, you are not likely to get a retail price.
 ... Also note that none of these are as simple as calling your broker. You must be prepared to find your own buyers. If you have weak sales skills, you should not invest in gems.
 
 Price Variations
  ... Another point to consider is that lower priced gems receive a higher markup than expensive ones. Low priced gems are frequently marked up three to five times. For example, when a jeweler orders a stone for a customer, he may have a set minimum price. It does not matter if the stone costs one dollar or five; a jeweler may feel he needs a minimum of ten dollars to justify the labor of ordering the stone.
 ... Mid-priced gems are usually marked up 100% between wholesale and retail. As things get more expensive, the markup gets lower. Anyone would gleefully accept a 25% markup on a $30,000 alexandrite. The diamond market is so competitive, that markups frequently drop below 10%.
 ... Now consider this from an investment point of view. The greater the difference between wholesale and retail, the better your chance is of making a profit. It is also easier to find buyers for lower priced goods. However, you can take this too far. It may be easier to find 25 buyers for $200 stones than one for a $5,000 gem, but it might not be easier to find 5,000 buyers for a one-dollar stone.
 
 Value Added
  ... There are two areas where gems take a substantial jump in price. One is between rough and cut; the other is between loose gems and finished jewelry. This involves more effort, but is one of the best ways to increase the value of your gems.
 ... With an investment of labor, a lapidary can turn low value rough into high value finished gems. The tricks here are to buy your rough at a price that allows enough markup to justify your labor, and learning to cut in a reasonable amount of time.
 ... If you are not a gem cutter, you can have others do the work for you. (See our Recommended Suppliers for gem cutters.) Again, you need to do your homework, but this is one of the most direct means of adding value to your gems.
 ... Setting the stones also requires special skills, but frequently less labor. You can also contract out this work if you are lacking the skills to do it yourself. Finished jewelry has the advantage of a larger market than loose gems.
 
 Trade Value
  ... Lastly, do not forget the time honored tradition of horse trading. A couple gems in your pocket can come in handy in a time of need. Imagine if your car broke down, or you found the picture frame you have long been seeking, and the cost was $100. If you had a sapphire that cost you $60 and is worth $120, the dealer might well take it in trade. You just made a profit on your investment!

Copied with permission of International Gem Society