Should We Really Invest In Diamonds?

Posted on Jan 3 2018 - 10:49am by Editorial Staff

Investments come in all forms and shapes. A priceless painting, beachfront property, and jewelry all appreciate in value as time goes by. But what about diamonds? Does it make sense to invest in diamonds too? It does look like it could be a great idea – diamonds are small and can be transported anywhere-imagine doing that with an expensive painting. The stone doesn’t require high maintenance and care – no humidity controlled rooms etc. a good safe, or a vault in a bank will do just fine. They have great value, with some diamonds selling for unbelievable sums of money; making them a good thing to buy and own. More importantly, there will always be a demand for diamonds – the market is growing.

But there are a few issues.

For starters, unlike its precious metal counterpart, gold, diamonds don’t have a fixed price. The four Cs – cut, carat, clarity, and color determine the price. This compounds the problem of the valuation somewhat. It is subjective as it is and with different scales applied by different jewelers, this can become an issue. So, you might find that you’ve paid a lot but don’t get commensurate returns.

Where the diamond makes sense is when we consider the world we live in – interest rates aren’t what they used to be and markets are grappling with a host of issues. Thus, having a diamond makes sense. If you are looking at a diamond as an investment, make sure that you keep the following points in mind:

  1. Buy the right stone – every aspect of the stone changes the price of the diamond. If you are looking at the diamond as an investment, you must ensure that you have good quality in every aspect of the diamond.
  • Clarity – look for FL or Flawless. This is the highest value of purity and is very rare to find. If not FL, look for VS2 but nothing less. Clarity is important because it preserves the strength of the stone, preventing breakage and removing brittleness.
  • Color – a colorless stone is a safe bet, because colored stones aren’t always everyone’s choice. Here, make sure you stick within the H, I, and, J levels.
  • Cut – the higher the quality of the cut, the better the stone will look. Cut determines the sharpness of the facets which then cause the diamond to coruscate and shine. Even the most expensive diamond can be marred by a badly cut façade. Look for Very Good and Excellent for cut.
  • Carat – this is one of the key deciders of the value of the stone. The bigger the carat, the more expensive the stone – or so it is assumed. But that only works when the remaining three Cs also are of high quality.
  • The brilliant shape – round – is the most popular diamond shape today. It is followed by the princess cut, which is square. The round diamond has more wastage because of the way it is cut. The square has the least. The shape also affects resale value.
  • The key is to ensure that the diamond has commercial value. Only the true connoisseur is interested in a pure, highest quality diamond and they may not be at the market you are at. It is better to look for a diamond of great quality which will appeal to buyers and jewelers alike. This is how you can make your purchase an investment.
  1. Insist on certification – while the jeweler can make a hundred assurances, you’ll only be sure of the authenticity of the stone if it is accompanied by certification. This is a clear indication of the value of the purchase and can be used during resale too. Make sure the certification is from a recognized institution, like the Gemological Institute of America.
  2. Be willing to wait – for a diamond to become an investment, you’ll need a few years – at least five. So if your idea is to sell the stone in a short period of time, then it will not work. As a commodity, like with any other commodity, stone value goes up or down. Sometimes, it appreciates incredibly slowly. So don’t tie money up hoping you’ll be able to get it back soon. That might not happen. So, be realistic about what you hope to get.
  3. Get your budget straight – you may have a certain amount in mind, which is great. But when you think about taxes, retailer mark up and hidden costs, the numbers start to add up. You need to consider insurance for the diamond so you have security till you decide to sell the stone. That’s another added cost. So when you decide how much you want to spend, you absolutely have to take these numbers into account too.

A diamond is a good investment, provided you’re clear about what you want to do and how you want to go about it. Don’t be impressed by get rich quick schemes. Take your time and then decide.

About the Author
Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.