Shirley Bassy famously said “Diamonds are forever” and it sure seems to be a major pull factor to why we’re seeing more investors exploring the world of diamond investing.
Chief Product Officer, Michael Finley from AuctionLux shares his insights in this interview, stating that diamonds are not just a girl’s best friend, especially when they bring such great returns.
Have you ever wondered why celebrities are willing to splash out millions of dollars on jewellery? Turns out, there’s more than meets the eye. Beyond being a fashion accessory to complete your outfit, diamonds also offer a couple of advantages, especially as an investment.
Diamonds have become infamous for their high value and can be seen as a status symbol for many. Diamonds began gaining popularity after a famous diamond company, De Beers, released a marketing campaign that associated the precious gem with love and marriage. Diamonds are also pretty accessible – you can get them anywhere, even online. Plus, no management services are required as you would typically store these precious jewels in a safe.
Today, many investors are to diamonds not just for aesthetic purposes but also for their attractive appreciation value. Interestingly, for the last 15 years, the returns for these fine-cut gems than those of equities. According to the Rapaport Diamond Trade Index, from 1991 to 2011 alone, the value of three-carat diamonds increased by 145 per cent, while five-carat diamonds increased by over 170 per cent.
Like Gold, diamonds are diverse in both character and content as each diamond has a different shape, colour, weight and clarity. It’s no surprise then that colourless diamonds are the most coveted as they have what is called a “flawless clarity”.
Currently, there are two main channels for investing in diamonds. You can either purchase investment-grade diamonds or you can purchase diamond jewellery. The latter, however, has a large markup which means you might not get the full value of your diamond.
Advantages Of Investing In Diamonds
There are many reasons why someone would want to invest in diamonds.According to Shirley Bassey, “Diamonds are forever” and for Marilyn Monroe “Diamonds are a girl’s best friend”. When you purchase a diamond and keep it for a long time, they are likely to be worth more than what you initially paid for.
Another reason why it is advantageous to invest in diamonds is their high demand. Demand for diamonds has been on a steady increase however supply has been struggling to keep up. With more people buying diamonds now than before, and with supply dwindling, you can expect that there would be someone out there who would be willing to pay top dollar for your precious gem. Who can say no to that?
When compared to gold, diamonds definitely take the cake simply because of their size and they certainly don’t take up much room. Since ancient times, valuable jewellery like diamond rings or gold bangles has been used as payment. However, when comparing a diamond trinket and a piece of gold of the same size, a diamond trinket could cost almost double or triple the price of gold.
Diamonds’ natural durability is also another advantage because they can be put through a lot, and they would mostly come out unscathed. You also don’t have to worry about the diamond fading or losing its shine if you take proper care of it. This means that you can wear it and flaunt it around as much as you like.
Another great thing about investing in diamonds is they are not reliant on stock, oil, or bond markets. This means that their prices are largely independent. This also means that in times of economic recession and other political or social troubles, the value of these gems will largely remain unchanged. In fact, diamonds have a rich history of recovering well from price and economic slumps.
How To Invest In Diamonds?
If you’re still interested in investing in diamonds, you might want to equip yourself with the know-how of diamond investing.Before you invest in diamonds, you need to ensure that your diamond was purchased at a price that is reasonably close to what you hope to sell it for because buying at retail and reselling at wholesale is a bad idea.
To ensure that you get the most out of your precious gem, you should connect with a dealer with access to international prices and markets, and who can give you unbiased third-party diamond grading. Apart from ensuring quality, they can also advise on the most opportune moment to make your transaction. You probably shouldn’t deal with the first dealer you meet. Scout around and compare the deals before making a decision.
It is also important to consider the quality certification that comes with your diamonds. Investment diamonds should be graded by the Gemological Institute of America (GIA) and subsequently confirmed by an expert. The GIA is a reputable grading institute that is internationally recognised.
But while the GIA is the primary grading authority, they grade all types of diamonds including substandard poor-quality ones. As a backup, you should get a lab report for your diamond from a reputable lab that is recognised in the market. This helps to ensure that the quality of your diamond is recognised, especially when it comes to reselling.
If you’re keen to see what this field of investment has to offer, without splurging on the gems, then you might want to consider investing in a diamond mining company instead. You could also invest in an ETF that focuses on the diamond industry.
When finding the right diamond, you need to first look at its physical commodities. The major deciding factor for a diamond’s price is its weight. A diamond’s weight is defined by carat for larger diamonds and point for smaller ones. Apart from looking at the weight, the cut of the diamond is also equally important. Good craftsmanship can help alleviate the diamond’s best features. In this respect, natural diamonds are a great investment due to their rarity.
While large and fancy-coloured diamonds are attractive to the eye, they might not yield the best offers when trading. Colourful diamonds are typically harder to resell, so you’ll want to choose something that has a demand. On that note, larger diamonds make a great investment piece as they are constantly in demand, however, they are short in supply and even harder to find. For starters, you might want to invest in something that is 2 carats and above, with either good colour or good clarity. This can help to make your diamonds more valuable and possibly demand a higher price.
Ultimately, diamond investing pretty much follows the same principles as any investment. Diamond investing can bring about large returns, but, like any long-term investment, you’ll need to dedicate a lot of time and effort to learn about diamonds. There are also risks involved, especially when you are dealing with dealers. You’ll also need a ton of patience, especially when looking for the right time to sell.
AuctionLux is a multifaceted fintech firm, founded with a core focus on bringing value to retail clients, with unique collaborative technologies.
With direct from source networks around the world, AuctionLux sources for valuable timepieces and other assets and introduces a platform for buyers to get rare item on one platform.
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