Diamonds have been considered precious gemstones for centuries. It wouldn’t be surprising if you’re considering investing in them. Many others have been interested in diamond investing these past few years too.
This is partly because investors are realizing that the diamond’s value increases over time. However, there’s a wariness towards investing in the gemstone. It’s more complicated than the usual investment options. Not to mention, the diamond market isn’t known for its transparency.
Investments in gold and silver are more straightforward but the trends change too arbitrarily. This means their value is not as consistent as the diamonds’ value. With that said, there are several upsides to investing in diamonds. Let’s discuss them one at a time below!
How Do You Determine Its Value?
Knowledge of valuation is one of the barriers that prevent prospects from investing in diamonds. It’s easy to know that diamonds have value but how will you know the extent of that? And how will you determine which diamond is more valuable over the other?
Whether you’d start a jewelry business or remain an investor, let’s start with the basics: the 4Cs.
- Carat
Carat is the diamond’s weight and it’s a straightforward factor in determining its value. A carat weighs 200 milligrams and below that is a point that is equal to 0.01 of a carat.
- Color
The diamond industry uses a color grading scale that ranges from D to Z. D is equivalent to having the least color while Z has the deepest hues. In terms of diamond investment, having less color is the better choice.
There are instances when its value rises if it’s colored. But that’s only a small percentage of diamonds available on the market.
- Clarity
The diamond’s clarity refers to the number of blemishes on the gemstone. A loupe is used to check the diamond. And if no inclusions can be spotted at 10x magnification, the diamond is graded as flawless.
A diamond can be graded or rated with the following:
- I1, I2, and I3 (Included)
- SI1 and SI2 (Slightly Included)
- VS1 and VS2 (Very Slightly Included)
- VVS1 and VVS2 (Very Very Slightly Included)
- IF (Internally Flawless)
- Cut
The cut is the design of the diamond and gives it the way it interacts with light. This factor is entirely skill-based. That’s why having a skilled craftsman in the diamond industry is a huge plus.
The cut’s quality is graded with the following:
- Fair or Poor
- Good
- Very Good
- Excellent
- Ideal
The Pros and Benefits of Diamond Investing
Diamond jewelry has seen a significant increase in investments these past few years. This is especially with the advent of lab-grown diamonds. Lab-grown diamonds are just like mined diamonds, except they’re made in the laboratory.
They’re just as authentic and as valuable as mined diamonds. The best lab created diamonds prove to be worth investing in as mined diamonds. And we’ll look at the factors that make diamonds a good investment option:
- Size
Diamonds don’t eat up a lot of room. They can and have been used as a means of money transfer since long ago. Even a diamond trinket, despite its small size, can cost double or triple if compared to gold jewelry of similar sizes. Hence, pieces of diamond jewelry are good options for investment.
- Storability
Because of its small size, it’s very easy to store. For example, you can keep a diamond worth thousands of dollars in a small safe. Diamond jewelry is also wearable and easy to see. Hence, investors have a feeling of security compared to betting on stocks and other digital investments.
- Durability
Diamonds have been known as the hardest mineral on Earth. Knowing that your investment is that durable gives you a feeling of security. They don’t wear off if given proper maintenance.
You can wear and enjoy your diamond jewelry for as long as you want. They’ll even last long enough to be heirlooms. Diamonds are also inflation-proof so you can have them insured.
The Cons and Risks of Diamond Investing
Just as there are benefits, there are also risks in this investment option. There are three cons to keep in mind when investing in diamonds:
- There’s a Lack of Price Transparency
You can find commodities like gold to have a commonly used price index that serves as a reference. However, diamonds don’t have that. Their price depends entirely on the demand and supply of the market.
To somehow remedy this, you should opt to buy from reputable dealers and insist on certification to verify the diamond’s value. The best groups to certify a diamond are the Gemological Institute of America (GIA) and the American Gem Society (AGS).
- There’s a Lack of Tradability
It’s risky to invest in something that might be difficult to sell later on. Diamonds tend to suffer from a lack of tradability. Even if a company does buy them, the price they’ll pay might be lower than how much you bought the diamonds for.
- The Benefits Take Time to Reap
If you’re looking for short-term investments, investing in diamonds isn’t for you. You need to have the patience to wait for big gains. You can make this endeavor a part of your long-term investment portfolio.
Investing in the Diamond Industry
When you begin investing in diamonds, you often buy the gemstones and wait to sell them in the future. This involves looking for a dealer. We don’t recommend buying from the first one you find. It’s best to canvass prices between several dealers to find the best one.
If you want to avoid owning diamonds but desire to be part of the market, investing in something connected to the industry will do. For example, you can invest in the stocks of a mining company.
Conclusion
Investing in diamonds can have big returns if you’re willing to dedicate the time and effort to learn more about them. Their value is determined through the four C’s (cut, color, clarity, and carat).
However, the pricing of diamonds is highly dependent on the demand and supply of the market. And that is only one of the cons of diamond investment. There’s also the lack of tradability where it’s easy to obtain them but hard to sell them.
But the pros of diamond investment are size, storability, and durability. Diamonds are easy to store because of their size. And since they’re the hardest mineral on the planet, you won’t have to worry about anything happening to them.
Does this mean that diamonds are a good long-term investment? Of course! Just make sure they’re properly cleaned and maintained. Bring out the best in the diamonds so they’ll reap the best benefits!
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