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Advantages
of
Gemstone Ownership
Many people have been
led to believe that there is an ancient and well established investment
marketplace for gemstones. This is, strictly speaking, not true.
The concept of buying and re-selling gems at a profit in a relatively
short period of time is quite new, and was largely created by promoters
in the 1960s and 1970s who were seeking new and innovating
ways of selling gems to the public.
On the other hand,
gemstones have, for thousands of years, been used as FINANCIAL
PRODUCTS. The distinction is that, historically, gems have NOT
been used as a "trading" vehicle for the purpose of
capital appreciation. Rather, they have served uniquely as vehicles
for the protection of wealth. Specifically, gemstones have been
used successfully for the following purposes:
TO STORE WEALTH
- since, during inflationary
periods, currencies become worthless, gemstones are an ideal means
of preserving the purchasing power (i.e., exchange value) of assets.
TO CONCENTRATE
WEALTH - gemstones are
the most compact form of wealth known and are capable of concentrating
greater value in a smaller space than any other commodity.
TO TRANSFER WEALTH
- compact, high value
items can be discretely and safely transferred (as in barter transactions)
or passed on to heirs. Gemstones are a highly private way of
accumulating wealth.
TO HIDE WEALTH
- gems have served ideally
as a means of protecting assets from theft, confiscation by government
or seizure during political and economic upheaval. Their small
size and high value means that they can be secreted in the smallest
areas.
TO DISPLAY WEALTH
- gems have always represented
mankind's lust for treasure and the representation of power, status
and wealth.
The capability of
gemstones to serve in the above listed ways is unmatched by any
other commodity. For these, and other, reasons gemstones have thus
acquired a unique role in man's financial affairs. It is a quiet,
discrete role, but one that has saved many fortunes and families
during the past centuries.
It should be clear
that the advantages offered by gemstones as financial products are
historically both important and provable. Gems purchased for
the specific purpose of acquiring these unique benefits will
serve as well in the future as they have in the past. What, then,
of capital gains and gemstone investing "for profit"?
The world geopolitical
situation clearly indicates a continued shortfall in the production
of high-quality gemstones. However, world demand for gems is also
increasing. This means that the prices of gemstones (as a group)
will almost certainly rise in the years ahead. This projected increase
was quite prophetic in the 1960s, and heightened the expectations
of investors who purchased diamonds and other gems with no other
goal than to resell them at a profit. However, the gemstone marketplace
is very large, very complex and quite merciless. Many gemstone investors
were never told that short-term gemstone markets are cyclical, and
that in recessionary times the demand for gems may weaken and liquidity
can be reduced. The mechanics of gemstone purchase and sale are
somewhat specialized, and are difficult to operate successfully
by those not involved in the marketplace daily. Therefore, while
capital appreciation is likely for gemstones in the future, DIRECT
ownership of gemstones by investors is NOT the most logical or effective
way of achieving profits.
The general concept
of "investing" is intimately linked with equities and
securities. If "investment" implies purchase and resale
for profit, then the most logical products for achieving this goal
are:
(a) fungible items
whose value can be. determined on a consistent and regular basis,
such as stocks and bonds, or
(b) shares in funds
whose assets are specifically acquired for capital gains, which
are professionally managed, and which can be liquidated on a fixed
timetable.
Gemstones, as commodities,
do NOT individually fit this description. But SHARES IN HARD ASSET
FUNDS that may involve portfolios of gemstones, perhaps mixed with
other tangibles such as precious metals, DO. Thus, "gemstone
investment," as it has come to be widely understood, is best
undertaken through the purchase of SECURITY PRODUCTS.
It is unlikely that
a gemstone buyer can ever be misled, or will fail to benefit from
his purchase, IF THE BENEFITS OF GEMSTONE OWNERSHIP AS RELATED TO
PRODUCT CLASSIFICATION ARE CLEARLY UNDERSTOOD.
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GEMSTONES:
non-security product
Tangible commodity
Buyer takes physical possession
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PURPOSE:
to hide, concentrate, transfer, store and display wealth
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