Because each gem is unique, grading reports provide important information on a stone's carat, color and tone, clarity and cut (the "4C's"). They also discuss any treatments applied as well as the stone's country of origin, which significantly impacts value.

While Genis doesn't think it's feasible for wealth advisors to become gemologists and buy the scientific equipment necessary to become experts in evaluating gems for their clients, he does believe they can learn to read AGL and GIA grading reports to gain a basic understanding of the qualities of a particular stone. He has posted a primer on how to read an AGL report at preciousgemstones.com. The site also has charts on retail gemstone price trends from 1975 to 2010.

Although recognized grading reports establish quality, they do not establish value. Prices for polished white diamonds can be compared to benchmarks like the RapNet Diamond Index (RAPI) and the PolishedPrices.com index. By contrast, colored diamond and gemstone prices are generally set by sales at major auction houses.

Buying Bling
Besides investing in a fund or buying loose gems, those of means can always invest in high-end finished jewelry made by big-name jewelers such as Van Cleef & Arpels, Bulgari, Cartier and Tiffany's. The more expensive and exclusive-pieces produced in quantities of no more than a few hundred-the more likely the items are to grow in value, the so-called "masterpiece effect."

The best bet on jewelry appreciation might just be to collect like film star Elizabeth Taylor. Her iconic handcrafted bespoke jewels, with exceptionally rare gemstones and pearls, all in exquisitely designed settings, established a world record for the sale of a private collection. Christie's December 2011 auction was estimated to bring in at least $30 million. It ultimately grossed a staggering $137 million, topping the 1987 record for the auction of the Duchess of Windsor's jewels. The fact that they were owned by a Hollywood legend and the unusually large size of some of the stones and pearls were undoubtedly factors in the fantastic success of the auction.
   
Ensure Insurance
In August 2011, a dozen thieves posing as maintenance workers broke into 170 safe deposit boxes at Banco Itaú in São Paulo, in the heart of Brazil's financial district, making off with over $50 million in cash, gemstones, jewelry and gold bullion. Banks typically provide very little insurance on deposit boxes without an appraisal of the contents. The majority of customers in this unfortunate case had neither obtained appraisals nor adequate insurance. 

"Many affluent people are underinsured," says Eric Gordon, a principal with Denver Agency Company, a Denver-based independent insurance brokerage that provides commercial and personal insurance to the wealthy. As part of a client's overall insurance program, Gordon recommends a few specifics when it comes to jewelry and gemstones: having the items valued by a reputable appraiser; purchasing an insurance policy that includes a reasonable inflation guard (e.g., 4% to 6% annually); and reviewing the client's insurance needs yearly to update values, add items purchased since the last review and delete items the client no longer owns.

Because of the difficulty of valuing rare gems and high-end jewelry, Gordon says the final safeguard is to choose an insurance company that will pay more than the insured amount for the items. His firm works frequently with the Chubb Group of Insurance Companies, which offers a 150% valuable articles replacement clause for scheduled items in its policies. "We can't be completely certain that we're going to get the value of the piece absolutely correct because it's based on perception, market value and other variables. If there's a loss and we're underinsured, at least we have an increased market value clause," he says.

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