Investing in diamonds: many pros and few cons

There are fewer and fewer people in the world who are distrustful of the word “investment”. And there are more and more of those who are thinking about investing and passive income in the future. Most often as assets are purchased shares, precious metals, currency, real estate. Less often – antiques, art objects. And only a few people think about investing in diamonds. Absolutely in vain!

For many centuries, literate people have been considering jewelry as an investment in the future, if not in their own, then in the future of their descendants. And in safes they keep not only currency, but also magnificent necklaces, earrings and rings with luxurious stones. So, when buying jewelry, keep in mind that diamonds are an investment that is very likely to pay for itself many times over. True, there are nuances.

What diamonds make sense to invest in

What is the point of investing in diamonds? Let us use examples to illustrate. In the early 70s, a 1-carat brilliant-cut diamond cost about $2700. In the early 2000s, the price was already over $15,000. And in 2015, it was $29,650. A tenfold increase in value in just half a century. Sounds great, right? But the analysts who made this calculation note that we are talking about a stone with perfect characteristics and flawless cut. There aren’t many of those. And here we come to the main question – which diamonds to invest in.

Stones should be considered as “investment” stones:

• Mass of at least 1 carat. Some experts recommend investing in stones weighing 3 carats or more.
• With high clarity indicators. As a rule, this parameter is evaluated according to the GIA system. The Russian system has its own classification: the clarity of a diamond from 0.3 carats is estimated on a 12-point scale. The higher the number, the lower the clarity. The range from 1 to 5-6 is considered ideal. It corresponds to the range from IF to VS2 according to GIA. You can read more about the clarity of stones in the article “Diamond clarity”.
• Colorless or with an elusive yellowish tint. This corresponds to the color characteristic from D to G according to GIA. In the Russian classification of color characteristics of stones weighing 0.3 carats or more are evaluated on a 17-point scale. Colorless or almost colorless stones occupy the range from 1 to 4. We talked more about color in the article “Diamond Color”.
• With a perfect cut. The shape of the cut is not decisive – only its quality. Although, it is worth remembering that round diamonds with 57 facets are traditionally more expensive. The GIA system offers a 5-point grading scale of cut quality. GIA investment stones should be graded EX (excellent) and VG (very good).

Colored stones occupy a special position. Investing in colored diamonds can bring a fortune after some time. Especially if they are rare stones of fancy colors. Here it is worth remembering that one of the factors of high price is rarity and scarcity. According to statistics, there is only 1 carat of colored stones per 10 thousand carats of colorless stones.

The most important thing is that the stone has a certificate. This is a diamond passport, a document issued by experts confirming its authenticity and compliance with the stated characteristics. It should be remembered that a certified diamond always has advantages over the exact same, but uncertified diamond. This includes price advantages. And another nuance: in Russia, buying and selling uncertified stones is illegal and threatens with criminal liability.

Now let’s take a closer look at investing in diamonds – pros and cons. Let’s start with the first.

Pros of investing in diamonds

There are many reasons to consider diamonds as an asset. Investing in them is both profitable and convenient. Here’s why:

• Low volatility of the asset. Prices on the diamond market do not jump – they grow steadily.
• Guarantee of reliability and profitability of investments – follows from the previous point.
• Anonymity of purchase and, as a consequence, the safety of the investor. Real, not the one that takes place with cryptocurrencies.
• There is no need to pay taxes as when owning other assets – for example, real estate, cars.
• Simple evaluation of the asset, full and clear control over the investment. The more carats in a diamond, the more expensive it is. There is nowhere simpler.
• Protection against inflation. Stones do not get cheaper.
• Ease of transportation. But there are nuances concerning customs regulations.

And the main plus for today is that diamonds will continue to rise in price. According to Rapaport data for 2022, prices for these stones rose to 13%, and a year earlier – to 30%. The value of pink diamonds, on the other hand, has risen 350% over the past decade. What deposit or stock can boast such results, especially in the long term?

Minuses of investing in diamonds

Alas, perfect assets do not exist, otherwise we would all be billionaires. Of course, diamond investments, as well as any other investments, have their disadvantages.

• High entry threshold. The price for diamonds weighing 1 carat starts from 255 thousand rubles. A diamond with impeccable characteristics will cost 10,000 dollars and more.
• Lack of clear concepts of sale and purchase, unlike classic assets: securities, gold and others.
• Tangible expenses for maintenance and storage of the asset – for example, in a safe deposit box. Even a reliable home safe deposit box will cost a tidy sum.
• Relatively low liquidity – it will not be possible to sell a diamond quickly and expensively.

Where to buy diamonds for investment

So, the decision is almost made. Procedural issues remain. For example, where to buy investment diamonds.

The option that immediately comes to mind is buying stones in retail jewelry stores. This is not the best and not the most rational solution: the cost of a stone includes a lot of overhead expenses of the seller plus intermediary commissions.

Another option is to buy from private individuals “by advertisement”. Here there are many disadvantages and not a single plus. In addition, it is illegal in our country and threatens with criminal liability.

Reasonable options: buying diamonds on specialized exchanges, directly from the manufacturer and its dealers, at auctions. It should be reminded that about 30% of the world’s diamond production is accounted for by the Russian company Alrosa, the miner and seller of the famous Yakutian diamonds.

The situation with investing in polished diamonds in the coming years

So, you are morally ready to become the owner of a luxurious, large, transparent diamond, but, due to recent events, you are a bit feverish about the prospects. Indeed, nowadays it is generally accepted to think about investments with caution, and even more so about investing in such an ambiguous asset as precious stones…..

But we hasten to reassure you: diamonds are not an instrument that, unlike stocks, currencies, bitcoins and precious metals, will become cheaper. Well, unless a multi-ton meteorite falls to earth in the form of a solid high-quality diamond (but then all the inhabitants of the planet will definitely be out of investment). Or someone will discover a new continent, consisting entirely of rich diamond mines. But this is hardly possible. For now, the price of diamonds is steadily growing by dozens of percent annually, deposits are depleting, and no new mines are on the horizon.

Diamonds are not just a gift

What do men want when choosing a diamond ring or a sparkling pendant for a loved one – a sister, mother, spouse or favorite woman? Of course, to make her happy, to tell her about their feelings, to let her realize how dear and important she is to us. But remember where we started – family safes, in which money and, along with them, precious jewelry are kept and inherited, which never gets old, always grows in value and in years can bring a fortune. This means that your present present – earrings or a diamond ring – is not just a beautiful thing, but also a solid contribution to the future of your loved one.