Diamond as an Investment - Is it a good idea?
By Judi Kipner Wolf , Tuesday, March 12, 2013
Besides being an investment in the future happiness of a newly engaged bride or groom to be, questions are frequently asked about diamond as an investment. Are diamonds a good investment financially? There is not a clear cut answer to this question, but it is an intriguing one! Like all investments, the results can be unpredictable. However, despite the volatile and erratic global market, the demand for diamonds remains strong throughout the world. Diamonds have unique attributes that make them desirable as investment vehicles. The tiny but mighty diamond is almost indestructible, is easily transported and easily stored. And of course they are beautiful, rare and timeless treasures that have been valued throughout history. Diamonds are produced by nature and are a limited resource that are difficult and costly to mine and may be depleted some day. For all these reasons people have purchased diamonds for investment through the generations, and will no doubt continue to do so.
It is important to understand a couple of differences between investment diamonds and other investment vehicles. First, each diamond is different, whereas most investment vehicles are commodity items that consist of identical units with identical attributes. There is no ready clearinghouse for exchange to liquidate diamond at a particular time for a particular price. To be successful investing in diamonds you will therefore need to develop relationships with experts in the diamond world who can assist you in selling the diamonds you buy. Success also presumes that you are able to buy the right diamonds at the right price. If all those conditions are met, investment diamonds might be right for you.
The price of diamonds historically has increased over the years, although there have been periods of some volatility. Along the way there have been many examples of tremendous appreciation. This is especially true for rare diamonds with very distinctive characteristics, although their pricing is somewhat speculative and they can be harder to resell.
When you ask experts in the industry about diamond as an investment they will tell you that an investment diamond needs to be purchased at a price that is reasonably close to what you can resell it for. In this way, even a small amount of appreciation begins to remove risk and make liquidation easier. Very large and expensive diamonds do not offer the ease of resale required to insure a timely return on the investment. Therefore, before investing in diamonds, it is prudent to make sure you have cash on hand for any expenses that can be foreseen.
According to a well known diamond trade organization the ideal diamond
for investment is a Round Brilliant from 1.01 to 1.49 carat, D-H in color and from IF (internally flawless) to VS2 (very slightly included) clarity. For the vast majority of people considering investing in diamonds it is essential to buy certified diamonds
with reports issued by a major diamond grading authority such as The American Gem Society Laboratories (AGSL) or The Gemological Institute of America (GIA). This will assure authenticity and provide needed documentation for reselling the diamond. Since high cut quality makes a profound difference in the beauty and desirability of diamonds, it’ is advisable that the diamond you invest in conforms to the top cut grades issued by of the AGS or GIA laboratories. Cut quality can dramatically impact the price and marketability of a diamond. Since there are many variables and possible combinations of shape, size, color, and cut quality, it is very important to consult with an expert that knows how to invest in diamonds. Your diamond consultant should be credentialed, knowledgeable, and well connected to international diamond markets. And he or she should be someone you are sure has your interests at heart.
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So the answer to the question “are diamonds a good investment” is probably best stated: “It depends!” As a pure financial investment, it is probably not ideal for most of us. But as an investment in enjoyment of one of nature’s most magical jewels, there may be no better investment. Especially if it happens to be in the form of an engagement ring and a lasting symbol of the love between two people. Now that’s something worth investing in!
For more specific questions ask our experts