Loose Diamonds As An Investment
Martin Rapaport (Chairman of the Rapaport Group, founder of Rapnet.com, the creator of the “Rapaport Diamond Price Report,” the standard for pricing loose diamonds of all shapes and sizes, has spoken at length about diamonds as an investment. While speaking to the Guardian in 2008, he cited diamonds' durability even during that years' financial crisis. As recently as summer 2012, he has referred to the investment market in diamonds as very good because of low prices for the stones and high rising demand coming out of emerging markets in China and India
According to the Gem Trading Company, in the last five years, the value of diamonds in the 1ct. to 5ct. range has increased by 12%. This year global diamond prices are predicted to increase by around 10%, while the price of the highest quality diamonds could jump as much as 50% and ultra-rare colored diamonds are up 26% this year compared to 2012 when they were up 24%. Extra-large rare diamonds are also doing well as exemplified by the 101.73ct pear shaped D color flawless diamond that sold for $27 million at a Christie's auction in May 2013.
Loose diamonds
for investment
In contrast to precious metals, there is no universal price per gram for diamonds. Polished diamond prices vary widely depending on the diamonds 4 C’s; Carat, Color, Clarity and Cut. Every diamond is unique, much like a snowflake or fingerprint, which means they must be valued individually. One other factor that can affect the value of the diamond are the grading laboratories, the most respected being GIA, HRD and IGI.
Since gold has been slowly falling in value*,
it has become a less attractive commodity for many investors. Diamonds are
becoming an attractive prospect if you’re looking for an alternative.
*As per
September 2013 when this article was published.
Buying A Loose Diamond As An Investment
Colorless diamonds are generally best for gifts, while colored diamonds; pink, yellow, green, blue, etc. can be assets with “highly attractive” investment potential. Prices for a number of smaller colorless diamonds have fallen, while those for many colored diamonds have been stronger. Colorless diamonds graded D, E or F are rare and demand the top
Why Buying A Loose Diamond Is A Smart Investment
- A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does make diamonds a form of emergency funding.
- A diamond is a tangible item that can be shown to potential buyers.
- You know exactly what you have and what it is worth and you can keep an eye on it every day.
- A diamond can be set into a fashionable piece of jewelry such as a ring or a pendant and enjoyed all the time. If you buy two diamonds they can be mounted as stud earrings.
- When the time comes to sell your beautiful investment you can take it to a store and sell it, unlike stocks or bonds that are virtual.
Things To Consider When Buying A Loose Diamond For Investment
- Extra security needs to be in place for storage of a loose diamond, either a bank safety deposit box or a home safe.
- The diamond needs to be listed on any content insurance of your house.
- It is very difficult to sell a diamond at market price and therefore it might need to be held for a while until it can be sold at a profit.
- The seller must take into account that that the buyer may incur local VAT taxes, where applicable, thus increasing the purchase price and making it more difficult to sell.
- It might take some time to sell on the open market. However there are many other selling options such as pawn shops and auction houses which charge substantial sums for selling diamonds. Yet, there are other options that cost next to nothing such as eBay, Amazon or other online venues.
Investing In The stock Market Vs. Investing In Diamonds
A Comparison Between 1999 - 2010
| Stock Market | Diamonds |
|---|---|
| The Dow Jones and S&P 500 had average returns of around 0.1% | Fancy colored diamonds had a 5.5% return |
| Global bonds had average returns of 3.3% | White diamonds has a return of 6.4% |
This information is based on a joint study that was done by Luc Renneboog a finance professor at Tilburg University in the Netherlands and Christophe Spaenjers, a finance professor HEC Paris.
Caratsdirect2U's office is located in the Diamond District in NYC and also has connections in the Israeli diamond exchanges. We therefore have access to many different shape, color and clarity diamonds at competitive prices.
For more information about diamonds as investment, have a look at our article, 10 Reasons Why Natural Fancy Color Diamonds Are A Wise Investment.