Investing In Diamonds – Is it a Smart Move Or Not?

Posted on Aug 26 2013 - 6:25pm by Wil

Diamonds

Whoever said never put all your eggs in one basket definitely owns a lot of eggs. Ideally, all money should not be placed solely in the bank or in real estate or stocks and even in jewelry. As much as possible, money should be placed in different forms of investment to avoid significant loss. As a result, more and more people are investing in jewelry, particularly diamonds, because of its accessibility and value.

According to Shirley Bassey, diamonds are forever. Marilyn Monroe also said diamonds are girl’s best friend. Even Rihanna sang that we should “shine bright like a diamond.” Over the years, diamonds have been associated with glamour, brilliance and beauty. Despite its radiance, find out whether buying diamonds is worth investing or not.

Diamond Grading 

One of the most commonly used and widely respected system used in grading diamonds is the G.I.A. Diamond Grading System. Under this system, diamonds have four basic qualities which is known as the 4Cs – clarity, cut, color and carat weight.

Clarity 

Clarity ranges from flawless to included. If a diamond is flawless (F), this means the diamond has no inclusions and blemishes while internally flawless (IF) means there are only insignificant blemishes which can be removed by minor re-polishing. Very, very slightly included (VVS1 and VVS2) have minute inclusions that are very difficult to see while very slightly included (VS1 and VS2) having minor inclusions that are ranging from difficult to easy to see. Slightly included (S1) are diamonds that have noticeable inclusions that can be seen even by the naked eye while Imperfect (I) have obvious imperfections that can affect the stone’s durability, transparency and brilliance.  

Cut 

Aside from the appeal, a diamond’s cut plays an important role in proper light refraction. Otherwise, an improper cut may hinder the color of the stone. Some of the most common diamond cuts are round brilliant, marquise (football shaped), emerald (rectangular), princess (square), oval and pear (tear drop). 

Color 

Under the G.I.A. Grading System, the diamond’s color are colorless (D,E,F), near colorless (G,H,I,J), faint yellow (K,L,M), very light yellow (N,O.P,Q), light yellow (R-Z) and fancy yellow (Z-). Aside from clarity, every diamond investor should always look into the color as well since this is what most people will always notice. 

Carat Weight

Carat weight is the unit of measurement to determine the exact size of a particular gemstone. 100 points is equivalent to 1 carat.

Why investing in diamond is a smart move 

Historically speaking, diamonds and any other jewels appreciate because it has more ‘intrinsic value’ compared to cars and houses. More investors are willing to spend thousands of dollars for long term value on their money and aesthetic qualities. Because of this, most jewelry sellers will say that diamonds are a good choice of investment.

But is it really worth investing for?

The answer is yes. The key in buying diamonds is to think long term in order to appreciate its value as an investment choice.First of all, diamonds are readily available in the market since most of the time, it is incorporated in other metals such as gold and platinum. You can also find a number of reputable diamond dealers whom you can buy from. More so, the value of diamonds increase significantly. According to the Rapaport Diamond Trade Index, 3 carat diamond increased by 145% while 5 carat diamonds rose by 171% between 1999 to 2011. Instead of placing your money in the bank for 10 years giving you a maximum of 4% annual interest rate, buying diamonds can double or triple your money in 3-5 years time. And that’s something banks are not capable of giving.

Putting your money in stocks can be very risky too. It’s true that you can immediately reap the investment rewards after a few days yet there will always be a possibility of losing your money instantly since the prices of stocks fluctuate on a daily basis. That is not the case when buying diamonds. You are assured that whatever happens, the value of diamonds will not go up and down.

Diamonds are something you can pass on from one generation to other. It is considered as a family investment because a purchase of diamonds often times marks an important event in the family history – wedding, anniversary or birthdays. Again, the concept of diamonds increasing in value over time comes into play.

Diamonds are also a good fashion statement. Some may argue that fashion’s demand for diamonds may only cause temporary increase in the price. However, diamonds are tangible assets that you can use, wear and even flaunt anytime you want, unlike real estate or stocks. Plus, diamonds never go out of style.

More importantly, think of diamonds as a form of security. Although your money is not in the bank, it is still capable of appreciating its value giving you a higher interest amount. In the long run, you can still earn from what you purchased because you are assured that whatever happens, the value of diamonds will always appreciate. Also, diamonds are something you can use and readily dispose in case you need additional cash. And you’ll surely earn should you decide to sell it after being in possession for years. Hence, always go for quality diamonds with no visible imperfections, D-H colorand a cut that will never run out of style. And of course, deal with reputable diamond traders or jewelers to assure that what is purchased is a quality one.

Despite the value for money, bear in mind that not all diamonds increase its value drastically. Further, the increase in price of diamonds will only take place in years. There’s no such thing as an ‘overnight investment’ where your money will constantly grow in a matter of days. While there is an assurance that the prices of diamonds will go up, you will have to be patient in case you decide to sell.

Keep in mind that making an investment, regardless of where you put your money, is a long term concept. While diamonds may be a good investment, it is still advisable and as much as possible, place your money in other options as well. Whatever happens, you won’t lose a significant amount in case prices fluctuates or depreciates.

Photo Credit: Flickr/Jeffrey Beall

About the Author
Wil

Wil is the marketing lead at avilandiamonds.com. Avilan Diamonds is an online diamond store that sprouted out of passion. It is the best place to sell diamonds jewelry for cash.