How Viable Are Diamonds As An Investment?

Q:

Hi Liz,

I have enjoyed looking around your site. I have a question. As I begin shopping for an engagement ring, I am thinking of the diamond as both a piece of jewelry AND an investment. I am looking at H&A diamonds that are rated higher in color and clarity with the thought that these stones will appreciate in value at a higher rate than lesser clarity and color diamonds. While I understand that we might not ever really see the difference, I would be willing to pay more for a diamond that would be an investment that she wears, IF it really is a viable investment. On the other hand, if an individual is going to have a very difficult or impossible time selling the diamond at a price that realizes that increase in value, then I don’t want to waste the money, of course. It would seem that with a modern certification, high grade stones are a bit of a commodity, and should be somewhat liquid without TOO big of a haircut when selling them. How wrong am I?

Thoughts?

If it matters, I am looking at diamonds in the .5 to 1.00+ carat range (depends on what size she ends up wanting, and I suspect she will lean towards smaller…) and spending $20K to $30K on the diamond as an investment is possible. I won’t spend anywhere NEAR that if the diamond purchase is more an expense. I don’t need to, as your site points out! 🙂

I am guessing that larger is better for investment purposes right?

Thanks in advance for your time and thoughts! And thanks for the great site!

Best,

Chris

A:

Hi Chris,

First, diamonds are considered an investment but only if you look for very rare top color/clarity grades along with size considerations (see ‘Selling Your Diamonds’ for more info). On a whole, the industry says that if you are seeking to make a profit on a white (colorless) diamond, then you will need to look at the 2.00ct+ range with top color and clarity grades. This is obviously very expensive; since the starting budget for any 2.00ct D Flawlesss ideal cut round brilliant is somewhere in the $50K + range. However, another option that most people are unaware of is the fancy color diamonds market. In the last 15-20 years, fancy colored diamonds have shown an increase in valuation per carat price and total overall price paid. Investors are looking at fancy colored diamonds as a viable and sustainable market for future investment.

In 2013, CNBC did a news report asking, “Are Diamonds The New Gold?” and they specifically highlighted fancy colored diamonds having increased by 300% in value over the last 10 years and this trend keeps continuing. You may view the excerpt of this interview with Henri Barguirdjian, Graff Holdings president/CEO below:

Unique online vendors like Leibish&Co have been selling fancy cut diamonds for more than 35 years. They are a combined diamond, jewelry and fashion house serving discriminating buyers looking for unique and hard-to-find natural fancy colored diamonds. They also fill a very important space in helping to guide consumers in fancy color diamond investment via three different vehicles:

1. Invest in shares of the major mining companies

2. Buy individual fancy colored diamonds (your option)

3. Invest in a diamond fund

The rarest diamond color is fancy red with no secondary hue.

As you’d be interested in purchasing a diamond for both engagement and investment the second option makes the most sense for you. I would say if your girlfriend likes smaller sized diamonds, then you can definitely find a gorgeous top quality fancy colored diamond (pink and blue are among the most popular and most rare) for around $30K as a smart investment. The rarest of the rare are red fancy colored diamonds.

Here are some examples from Leibish&Co that would fit your current budget:

http://www.leibish.com/pink-diamond/1.00ct-light-pink-heart-vs2-86322-15506

http://www.leibish.com/pink-diamond/0.27ct-fancy-intense-pink-round-si2-91558-16038

http://www.leibish.com/blue-diamond/0.57ct-fancy-light-blue-radiant-if-76947-14716

http://www.leibish.com/blue-diamond/0.16ct-fancy-vivid-blue-oval-vs2-10291-3722

If you were interested in investing in a rare fancy pink diamond, I recommend you read up on them here: ‘How To Buy Pink Diamonds’. Pink diamonds are a very smart investment option right now, as the Argyle Diamond Mine produces more than 90% of the world’s fancy pink diamonds and just .03% of the world’s global diamond mine production. Natural pink diamonds cost up to 20x’s more than colorless diamonds but double in value every 5 years and never decrease in value. This is due to the fact that the Argyle Diamond Mine is expected to close production in 2020. Thus, natural fancy pink diamonds from this mine are especially valuable.

Argyle pink fancy colored diamonds from Leibish&Co.                                                                                                                                                Here are some actual price statistics:     2003 – .50ct Fancy Intense Pink diamond was priced at roughly $30,500/carat                                                                                                         2008 – .50ct Fancy Intense Pink diamond was priced at roughly $50,000/carat                                                           2015 – .50ct Fancy Intense Pink diamond is now priced at $145,000/carat

In colorless diamonds, you’ll want to go for ‘D’ color and Flawless or Internally Flawless in clarity. These are extremely rare. Of course you must ensure that the diamond has either a GIA or AGS grading report and has Excellent/Ideal cut proportions. Here are some considerations:

1.020ct D IF for $26,434.00 and this 1.281ct D IF for $32,030.00.

I hope this answered your questions and gave you some food for thought. Do you think a fancy colored diamond might be an option?

Speak soon,

Liz

Q:

Hi Liz.

Lots of food for thought. Not sure if a colored diamond is for her, or if I am just better off looking at it as an expense and getting a really well cut lesser diamond. I am going to have to roll it around a bit.

Thanks for the pointers. I will read the article on the pink diamonds tonight!

Thanks again!

Chris

A:

You’re welcome Chris.

It’s definitely a very intriguing option. From my personal point of view, why not add more value to your engagement ring by making it a viable investment vehicle? I think consumers will start to think this way as time goes on. As the industry continues to innovate there will be more and more options for consumers to think about, including the 100% pure carbon lab-grown diamond market. The days of De Beers monopolizing the industry are over and it is an exciting time for retailers, investors, collectors, and consumers.

Best,

Liz