Gems vs. Paper Assets
by Robert Genis
Why do people collect/invest in diamonds and colored gemstones? I once had a client that lived in Florida. He loved green stones. He started buying chrome tourmaline, next tsavorite and finally made his way to Colombian emerald. I would personally travel to Colombia once a year to buy him one stone. We would talk on the phone every night about what I had seen that day. I would probably look at 10,000 stones over a two week period and buy one for him. After many years, he had built up quite a portfolio.
I finally asked him what he did with his Colombian emeralds. He stated once a year, he would go down to his bank. He would go into his safety deposit box and take out his collection. Once inside the small room, he would open his gem box and look at his gemstones. He said it made him happy, unlike paper investments.
Hard Assets vs. Paper Assets
There are two types of financial assets. Paper assets include stocks, bonds, currency, money market accounts, C-D’s, etc. Hard assets include gemstones, diamonds, gold, silver, land, stamps, rare coins, collectible cars, wine, etc. Throughout most of our lives, the majority of people invested strictly in paper assets. The one exception was the late 1970’s when inflation was out of control. Recently, people have again become more concerned with a financial collapse. Many feel paper assets will fare poorly during economic turmoil, like what happened in 2007-09. Although it is possible all assets would be hurt in a full fledged Depression scenario, the general feeling is it would be better to have real assets with intrinsic value to buy, sell and barter with. I would rather own a Burma ruby than a California state bond.
However you feel about the future, it simply makes rational sense to allocate your funds between these two types of assets.
Gems vs Paper Assets
When you own top gemstones, you can hold a real, tangible asset in your hand, and that asset is highly portable. In addition, gemstones really do last forever. Your heirs will be happy as these stones will outlive all of us. Also, gemstones are very private investments as you don’t need to disclose you own them to anybody. If you buy, sell, and trade properly your gem collection should grow and grow. In a sense, it is almost a forced savings plan. Building a collection of fine gems is also fun and exciting. Unlike buying a stock certificate or a bond, gems are fascinating assets to accumulate. Investors should focus on collecting stones that you love. Many investors feel a real pride in owning some of finest, most rare natural beauties in the world. A top gem portfolio is viewed by collectors as considerably more enjoyable than looking at a declining 401k stock statement. You will also not experience the stomach-churning volatility of the stock markets in gemstones. Stocks have rose or fell more than 1% in 25 of the last 39 trading days. The only downside to owning gems and other collectibles is they are not immediately liquid like stocks.
Many people are abandoning their paper financial portfolios and buying hard assets. Stock investors are abandoning the stock markets in droves. Investors have pulled almost $125 billion out of emerging markets since June. Many are taking tried and true “buy and hold” theory and applying it to hard assets instead of paper assets. Be prepared.