The nuances of investing can be pretty complex for anyone who doesn’t understand how it works. You need to have knowledge about the technical analyses of the market. You need to be strategic about when to invest and when to stop. One strong characteristic of a good investment is sinking money into a portfolio with the highest chance of giving you ROI.
With that in mind, it would be easy to think that investing in diamonds is a good idea. After all, these are high-value gemstones. And the outlook is pretty positive if industry reports are anything to go by.
Despite the Covid-19 supply chain disruption, the diamond market has recovered quite well. There have been high returns in the equity markets within the sector. This is attributable to increased consumer demands for jewelry.
Industry giants like De Beers’ revenue surpassed $4.82 billion in 2021. That represented a 41% increase from the previous year. Now, industry analysts are very positive for 2022. New business avenues are available by targeting new demographics using the right mix of strategies.
This article explores diamonds as a potential investment asset class. Let’s see what we can uncover.
Table of Contents
What to Know About Diamond Investing
The key attribute of investment-grade diamonds is quality. That translates into absolute perfection, which will attract the highest value. Pay attention to the 4 Cs of diamonds: color, clarity, cut, and carat.
Diamonds that achieve GIA triple excellent rating are in very high demand. You will not have an issue getting an excellent resale price. True, you will pay more for them. But the global demand means you will never lack a market the day you decide to turn the stones into cash.
The advantage is that the diamond industry has undergone significant changes over the years. Before, there was only the option of mined diamonds. But now, there is the opportunity to buy lab grown diamonds. Unlike their contemporaries, lab diamonds grow in labs. But the resultling diamond is as good as the natural ones. They comply with the 4 Cs of cut, clarity, carat and color. Lab grown diamonds undergo the same certification and grading as mined diamonds. Yet they have several advantages, including environmentally safe production processes.
Everything happens within lab settings, thus no harmful impacts on the environment. The price can also be nearly 40% lower, yet there is no compromise on the 4 Cs.
Investing in diamonds is less risky than other products. The market price fluctuations are not as severe for this sector.
High Returns
As we stated, diamonds are very valuable gemstones. It is unlikely that the value will decrease anywhere in the near future, may it be small stud earrings, your diamond wedding sets, or engagement rings. That makes them a solid investment asset class. It is a good option if looking for a long-term investment vehicle.
The industry projections we shared above show that the demand for diamonds is at an all-time high. Indeed, the market has managed to maintain the trend over the years. The rule of scarcity has a role to play.
Diamonds are not mass-produced products that you can buy in any market. Indeed, acquiring some of the best stones is quite a process. The long line of waiting buyers quickly snap up whatever finds its way into the market.
Rarity of the diamond determines the pricing. So, that rare, flawless 10-carat diamond engagement ring that has been in your family can fetch a pretty penny in the market.
Jewelry as Investment Options
The best way to invest in diamonds is by buying jewelry. That serves several purposes. To name a few:
- Your money is safe; you can get it back by selling the pieces. The trick is to buy high-quality pieces. The range of options with what you can buy is vast. These include diamond earrings, diamond rings, diamond tennis bracelets, and more. Please make sure you purchase the accessories from reputable dealers. Get a certificate of quality as an assurance that you are buying authentic diamonds. It also helps avoid fraudulent and unscrupulous individuals who are very present in the diamond industry.
- You can enjoy using your investment as long as you have it. It is not like having paper wealth for your stocks and shares. You can wear the diamond jewelry and lock it back in the safe at the end of the day.
- The investment can stay in your family for years without losing value. Please take insurance for the pieces to guard against loss or theft.
- Jewelry allow you to diversify your portfolio. You can buy different accessories weighing anywhere from 0.5 carats and above. Also, go for clarity ratings of Loupe Clean (IF) or FL. Such stones are scarce, meaning you can be sure of making a profit. Investing in jewelry means you can sell off parts of the investment when the time is right. Disposing of smaller carats will be easier than selling one huge stone.
- Diversifying also means buying different types of diamonds. Invest in clear, pink, yellow, blue, or even green stones. You can always sell the ones that attract the best pricing at that point.
Learn To Guard Against Loss of Value
Professional diamond buyers pay trade prices for investment-grade diamonds. These come as loose gemstones that attract wholesale pricing. You will lose value if you do not buy the diamonds at trade price. That is because you have to factor in third-party commission and other fees.
By the time the stones reach the retailers, they will have passed through many hands. This includes mediators or brokers who must make money as well. The trick is buying as high up the distribution chain as possible. If you can get them straight from the mines, even better.
Furthermore, even if you want your investment-vehicle to be jewelry, you’re better off buying loose diamonds. At the right time, you can get professionals to set them into the accessories you want. Please make sure you work with experts to ensure proper mounting. That can make a big difference in how much you will get in the end.
Final Thoughts
Are diamonds a worthwhile investment-vehicle? If we are to believe the industry projections, then the answer is yes. But like any other investment, go into it with a sound strategy. Learn all you can about diamonds and diamond investing.
Buy good quality stones or jewelry to get a good ROI. Finally, stick to the investing rule of diversifying your portfolio. Don’t dump all your money on clear diamonds, for instance. The market demand for colored diamonds can suddenly go up.
