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  • Are Diamonds Forever? How to invest in them

Famous diamonds like the Hope from India, the Yellow Tiffany from South Africa, and the Williamson Fancy Pink inspire the imagination and are so valuable they seem almost like fictional objects of desire. Their size can leave you in awe and you can practically go blind from their beauty when in their presence. But diamonds can also be a practical investment. In markets where inflation rates have soared; investors have sought out diamonds as a way to put a hold on the value of their currency. The wealthy have used their diamonds to get them through tough economic times such as during WWII and the Asian economic crisis of 1997. In our current economy, investing in diamonds is paying off for many.

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A Rich Man’s Game

According to the international diamond wholesaler Ajediam, prices for diamonds have increased on average 15% each year since 1949. However, investing in diamonds comes easier to those deep-pocketed individuals with the extra money to spare. Capital requirements for diamond investing is high and most new investors are already millionaires. The price of a premium cut 1-carat diamond can range from $14,000 to $25,000 depending on the quality.

 

Determining Value

The value of a diamond is based on the 4 C’s (Cut, Clarity, Color, Carats). Cut refers to the way a diamond has been shaped, its faceting pattern and its polish or surface finish. Clarity or purity is a diamonds’ ability to let light in and reflect its brilliance. For example a diamond with a clarity grade of LC/ IF has no internal or external spots so it is valued higher than a stone with minimal flaws. Colour is also a factor. Most diamonds are white or colourless but the most rare and priciest diamonds are the naturally coloured or "fancy" stones. Carat is the weight of the stone. In contrast to the 1-carat mentioned earlier, a 3-carat stone could be priced at $40,000 or more depending on its distinct characteristics.

Diamonds are the hardest natural substance known.

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Diamonds as an Investment

It may sound contradictory but a big part of the allure of diamonds for investors comes not from their romantic symbolism but from their practicality. Diamonds are easy to carry. An investor can easily carry thousands or even millions of dollars worth of diamonds in a small pouch. Also, their value is not directly linked to the stock market, making them an ideal financial instrument that holds its value in times of recession and increases in value during inflation.

According to Pastor-Genève, a worldwide wholesale dealer of high end coloured diamonds, the key to making a worthwhile investment is to buy the most rare and largest diamond you can find. Naturally coloured yellow, pink, sapphire blue and green diamonds occur as a result of a chemical reaction with other natural substances in the earth and are more difficult to come across. Due to their rarity, these are considered the most valuable, even more so than white diamonds.

Diamond investing, for all its appeal is not without its drawbacks. Diamonds are easy to buy but not easy to sell. Large-scale frauds and scams have made jewellers apprehensive and the most rare and high caliber diamonds have a better chance of being purchased. Not to say your 1-carat diamond will not be purchased, it’ll just take longer. Selling your diamond at a profit also will take time. A rare blue diamond can take at least five years to double in price and a yellow diamond can take eight to 10 years. In addition, supply and demand play a key factor on selling power. The ratio of white to coloured stones is 10,000 to 1, so if you have a white stone, chances are it will be more difficult to find a buyer for it.

Tips

When shopping for diamonds always buy them at wholesale or near wholesale prices. If the price of the diamond is five to 10 percent more than the cost, keep looking for a better deal. Go to a reputable dealer who sells GIA certified diamonds. GIA is the Gemological Institute of America, a non-profit institute considered a foremost authority in gemology. Diamonds certified by EGL USA Group, the world’s premier independent gemological laboratory is another option.

Diamonds have proved their worth as a stable commodity that maintains its value in the worst of economic time. While there’s a bit of a catch 22 here in that you need to be fairly wealthy to begin with in order to invest in diamonds, you can get started for just a few thousand dollars and rest assured that, in the long run, that investment has a very good chance of paying off.

 

The reason I have mentioned price’s in Dollars, is because they are priced in Dollars worldwide. If you do buy as an investment and you are not in America, take in to account the conversion rate and look at the historical currency chart. It could make your investment go a little bit further.

 

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