Investing in gems for fun and profit

When you're shopping for a stone, it's important to understand that many colored gemstones have been treated and enhanced. That's perfectly acceptable, says Antoinette Matlins, a noted Vermont-based gemologist and author of "Colored Gemstones."

"Emeralds have been oiled for thousands of years; sapphires and rubies have been altered through heat at least since Roman times," Matlins says. "Treatment processes allow you to have a product formed by nature but improved for clarity or quality. Had we not begun routine treatment, no one but kings and queens and the world's wealthiest would wear them today."

Today, natural unenhanced rubies, sapphires and emeralds are among the rarest of all gemstones, Matlins says. If a seller says a stone is natural or unenhanced, make sure he has the certification to support that claim and make the sale contingent on an independent, third-party analysis. Walk away from any seller who won't submit the stone to a lab for a grading report.

In the United States, the most respected labs are the Gemological Institute of America, the American Gemological Laboratories and American Gem Trade Association Gem Testing Laboratory, she says. Many sellers will present their reports with the stone, but it's not uncommon for a buyer to then send the stone with that report off to another lab to make sure the stone in the report is the one that's being offered for sale.

The cost for the report starts at $100, plus shipping costs of the stone. For a 1-carat diamond, expect to spend about $330, with the cost going up with the size of the stone, says Robert Genis, editor of The Gemstone Forecaster, a quarterly newsletter for gemstone collectors and investors.

"That independent, third-party grading is the key to investing or collecting stones," he says. "If you look at all the auction catalogs where goods are selling for $100,000 to $200,000, they pretty much all have GIA or AGL certification."

The report won't tell you how much the stone is worth; that's the job of an appraiser. It will tell you what kind of stone it is, how much it weighs, how it's been cut, its color, tone and brilliancy, the imperfections in the stone on a standard grading scale, any treatments that have been done on the stone and the country of origin.

For detailed information on what the report data means for colored gemstones, visit the American Gemological Laboratories site. For diamonds, check out the GIA's tutorial. You can also learn about gemstone standards at Diamond Guide (click on the Buying Tools checklist), or check out the tutorial on gemstone clarity, color, cut and carat at the Pricescope Web site.

Much of a stone's value will be based on subtle color differences, Matlins says, that can change with lighting conditions. Before you buy a stone, look at it both in daylight and lamplight. Indoor light is the best light for viewing rubies because that light is at the high end of the red light spectrum. Buy a jeweler's loupe, a 10X magnifying glass that will help you detect noticeable flaws and polishing marks.

If you don't have the background or don't want to take the time to learn, you need a knowledgeable expert that you trust to make the assessments for you, much as you would a stockbroker or mutual fund manager for equity investments.

The people who don't want to take the time to learn about gems are in the minority, Genis says. Most of today's buyers are collectors with a passion for stones and want to know everything they can about them.

"Some of my clients would never part with these stones at any price," he says. "It's an addiction. They become obsessed. Thank goodness -- at least for me."