Advantages and disadvantages of investment, Risks of investment - Investments

Advantages and disadvantages of investing

Investing in precious stones is much like investing in works of art: like a good picture, these precious stones are acquired not only for objective characteristics, but also because they deliver aesthetic satisfaction. But, on the other hand, precious stones are not subject to the influence of fashion, as individual works of painting. An important advantage of investing in precious stones is that in situations of crisis, political and economic instability, currency shocks, precious stones become for potential investors almost the only asset that is trustworthy.

The main disadvantage of investing in precious stones is their relatively low liquidity and high taxes. It is difficult to sell a precious stone, like a jewelry, while the private seller loses the VAT paid when buying. Therefore, the difference between the prices of buying and selling small jewels is significant, and it is unlikely that they will be sold in a few years even at the price that they were bought. Find a buyer for large stones is much easier. Thus, investments in precious stones are, as a rule, long-term investments, from which there is no need to expect quick income. In this regard, for short-term investments precious stones are not suitable. In most cases, it takes at least five years to reach the break-even level.

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In addition, the market of colored gemstones has a less organized infrastructure like the diamond market, so it is often difficult for investors to determine whether a fair price is paid when buying a precious stone.

Investment Risks

The main risk is the high volatility of prices for precious stones. In this regard, the investor may not receive the desired amount if it is necessary to sell the stones during the period of their price reduction.

When investing in colored gems, one should keep in mind that the turnover of this market is significantly inferior to that of diamonds, so that the liquidity of the market for rubies, sapphires, emeralds and other precious stones is often not high enough.

In the market of colored gemstones, a sharp fall in prices of a certain stone can occur in the case of the discovery of a new deposit (as it happened with amethyst), which serves as an additional risk factor.

An important risk factor in the market of colored gemstones is the complexity of their gradation. As already mentioned, minor differences in & quot; saturation & quot; color, his & quot; warmth & quot ;, & quot; game of shades & quot; and the like, i.e. in properties that are very subjective, can significantly change the price of the precious stone. Therefore, the probability that the stone purchased by the investor will suddenly drop sharply, is very high.

Finally, you should not forget about the risk of buying a counterfeit or synthetic stone.

Minimum investment amount

Recommended by experts, the amount of investment in products with precious stones starts at $ 50 thousand. And the minimum cost of one jewelry, which can potentially bring its owner profits after resale, is approximately $ 8-9 thousand.

Investment Costs

First of all, stones must be certified, otherwise operations with them will be considered illegal. And the retail price for certified stones differs from the wholesale by 40-65%. It is worth considering the cost of storage (safe at home or paying a bank cell) and jewelry insurance. Therefore, to buy a separate stone is worth either for the purpose of long-term investment (in the hope of a future growth of the chain), or to insert it into the frame, and then sell already in the form of a jewelry. The latter option allows you to significantly save on costs - the mark-up of jewelers on stones in finished ornaments is up to 150%. If the product is "assembled in parts", it will be necessary to pay much less, and the probability of buying a counterfeit stone in this case is extremely low.

When buying a colored gemstone abroad, it should be borne in mind that retail jewelers set a mark-up from 20 to 100%. Sale of precious stones requires payment of commission of up to 20%. You can buy or sell a stone at an auction, paying a commission, which is usually 10% for both the seller and the buyer.

When buying expensive stones, it is necessary to carry out the examination of the sample in laboratory conditions, which also requires certain costs.

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It is necessary to provide for the costs of insurance for the purchased stone and ensuring its safety. Most expensive stones are stored in leased cells in banks.

Return on investment. When investing in diamonds, one should not expect high returns: the average yield is 3-4% per year. According to experts, from the investment point of view, diamonds are a controversial tool, but to save money is quite suitable. A certain profitability will be obtained, because with time, prices are still rising, but one must be prepared for the fact that growth can not compensate even the current inflation.

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