Allegedly, diamonds won’t age or lose their shine even when the last plastic bag and can of Coca Cola in biodegraded. But nothing comes easy. Mining for a single-carat diamond requires digging through several hundred tons of ore. Nevertheless, digging them up is considered an extremely profitable business. Most importantly, diamonds are a rare non-renewable resource, so they are ideal for long-term capital investment.
Here is what you should know about investing in diamonds:
- When buying a diamond, in addition to the seller’s margin, you pay VAT. This means that buying diamonds and selling them before at least three years is completely unprofitable.
- The vast majority of investment diamonds are brilliants, i.e., diamonds with the most popular cut used, called brilliants. The method and craftsmanship of grinding have a significant influence on the value of a diamond for investment.
- Diamonds are evaluated according to the 4C rule – from the English words carat, cut, clarity (purity), and color (hue).
- The investment in diamonds should last at least six years, after which, under favorable circumstances, we can expect even 30% to 40% profit.
- Carat is a unit of mass of a diamond and should not be confused with the term for the alloy’s gold content. One carat = 0.2 grams of a diamond or 1/24 of the gold content in the metal alloy. As long as the purest gold has 24 carats, there is no upper limit on the diamond’s weight. The largest excavated diamond weighed 3106 carats, which is over 600 grams.
- A typical investment diamond has between 0.2 and 5 carats. The choice of a diamond with an appropriate weight is critical because diamonds with different parameters gain in value at different rates. Thus, in recent years investors investing their capital in diamonds weighing from 1.5 to 3 carats could count on a few dozen percent profit per year. In comparison, those who decided to invest in diamonds weighing more than 5 carats gained only a few percent.
- Each diamond is different and undergoes a separate valuation. When valuing a given stone, it’s worth being careful because it is easy to overpay. The disadvantage of the diamond market’s investment is low transparency, making it quite prone to overpricing by sellers.
- The investment in the diamond market is not as liquid as forex. When investing in diamonds, you have to prepare yourself for finding the right buyer, mainly among other investors.
- Most investment diamonds are not used in jewelry. This is because their color and purity coefficients are too high in relation to diamonds embedded in jewelry. Jewelry diamonds are cheaper and more common, but they have a large market.
- Unique colored diamonds exist, the so-called fancy. They are a treat for investors and collectors and therefore reach exceptionally high prices.
Diamonds are an excellent investment for people looking for long-term capital investment. Unlike currency markets, diamonds and brilliants are relatively resistant to the turbulence of the global economy. However, as far as the market is concerned, it is worth turning to China, where you can find interested investors and collectors.