Should Your Clients Consider Diamond Investing?

Should Your Clients Consider Diamond Investing?

These sparkly precious jewels are pretty to look at, but should they be a part of your clients’ portfolio? Like any long-term alternative investment, there are both pros and cons to consider.

In today's versatile market, there are a fair amount of investors who are in favor of expanding one’s portfolio to include tangible assets. Although there are a number of categories to consider, color diamonds have managed to demonstrate price appreciations, which no one can ignore. However, like any long-term alternative investment, there are both pros and cons to consider.

The Pros

One advantage to investing in color diamonds is their steady price appreciation.

They’ve have had a steady price appreciation over the past thirty years. From the various publicized auctions, it can be seen how prices have appreciated greatly over the years and that color diamond pieces have broken many price records. In fact, you can visit www.christies.comand www.sothebys.com(the world’s largest auction houses), to look at the auction results for color diamonds. 

Color diamonds are also easy to transport. The mere fact that a color diamond is so small yet incredibly valuable is largely an advantage for investors, since it can be transported with great ease. Many tangible assets, gold included, cannot be transported so effortlessly. The equivalent amount of gold to a 3-carat yellow diamond would be much more complicated to move from place to place.

Diamonds are also easy to keep hidden. Unlike gold, paintings, and sculptures, this tangible asset does not require extra space or a specific way of concealing it.

They are also very durable. In fact, Diamonds are the hardest natural element known to man, as a result of inconceivable conditions they endured under the Earth’s surface for an extraordinary amount of time. They have been known to survive pretty much any circumstance nature has imposed on them. Although a diamond won’t break, it can scratch or chip. Therefore, be sure to pack it with care, or, even better, have it set in jewelry and wear it.

One thing many investors do not think about when considering investing in a tangible asset is the privacy they will be provided while acquiring the item. Many times the investment piece is sold in a very public fashion, giving other individuals access to the information of what you now own and how much it is worth. Color diamonds are not sold in this manner and do not even require reporting for tax purposes.

The Downsides

With any exotic investment, there are risks involved, and diamonds are no different.

The appreciation for color diamonds can be good, especially if your clients have waited the right amount of time. But since there is a need to wait for someone to purchase the stone, it can be hard to liquidate. Your clients have to find the right channels for liquidating the diamonds, as well as wait for the best buyer. Many have utilized the public auction houses or had the stone purchased from diamond trading companies. Although they are both viable options, you will likely have to pay a small percentage of your profits.

While color diamonds are easy to conceal and transport, they are also quite easy to lose or have stolen. It is easier to slip away with a tiny stone in your pocket than with piles of heavy gold. This is why insuring the color diamond is mandatory.

Purchasing color diamonds from auction houses can be convenient, but they do not come without a cost. There are auction buyer fees and seller commissions that need to be paid, and they don’t come cheap.

Which Colors to Invest In

The color of the diamond is very important and should, most often, be as pure and as intense as possible. There are two categories one should be looking into:

1. Investment Grade Diamonds

The colors which have demonstrated a greater appreciation than all others, and should be looked at when considering an investment are natural pink diamonds with a fancy intense or fancy vivid intensity, or fancy yellow diamonds above 2.00-carats, with a fancy intense or fancy vivid intensity, with a fantastic clarity grade (VS+).

2. Collector’s Items

Although they are all rare, diamonds that are especially unique and hard-to-come-by, such as a vivid blue, a vivid green, a fancy red, a pure violet, or a deep orange, are often sought after by collectors and diamond enthusiasts. Even a very small stone with these colors will be easier to sell and will likely realize a high sums.

Racheli Fuld is a freelance jewelry writer and blogger. With her well rounded background in writing, together with a deep understanding of natural fancy color diamonds, Racheli has been putting together diamond-related articles for Leibish & Co. for the past few years. Through her experience she has contributed to numerous articles, educational guides, and trend setting material.

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