Colored Diamond & Diamond Investment
Coloured diamonds can be very valuable. By 1991, fancy coloured diamonds held 19 of the top 20 per carat price records at auction, beating white diamonds, emeralds, rubies and sapphires. At the present time fancy colour diamond output is estimated at 1 to 2 carats out of every 3000 carats mined. The colour of coloured diamonds is due to the presence of impurities or structural defects.
Fancy coloured diamonds are not always naturally coloured as their colour may have been modified or enhanced through a process involving irradiation or heat. The fancy colored diamonds are too beautiful to neglect. These rare gems form through thousands of years of crystallization and are natural products of the earth. Adored by both celebrities and royalty, colored diamonds are often seen on the Red Carpet and are true symbols of status. In addition to their beauty, purchasing a colored diamond is considered a long term investment as the value increases by 10-15% each year.
A chemically pure and structurally perfect diamond is perfectly transparent with no hue, or color. However, in reality almost no gem-sized natural diamonds are absolutely perfect. The color of a diamond may be affected by chemical chemical impurities and/or structural defects in the crystal lattice. Depending on the hue and intensity of a diamonds coloration, a diamonds color can either detract from or enhance its value. For example, most white diamonds are discounted in price when more yellow hue is detectable, while intense pink diamonds or blue diamonds can be dramatically more valuable. Of all colored diamonds, red diamonds are the rarest.
The value of diamonds as an investment is of significant interest to the general public, because they are expensive gemstones. The difficulty of properly assessing the value of an individual gem-quality diamond complicates the situation.
1. Diamonds dont take up room
Diamonds have forever been used as an excellent means of transfer. The fact that such a small item can be worth so much money is astounding. You can easily keep a one million dollar diamond in the smallest of safes.
2. A diamond is durable
It doesn’t break or wear off –As the hardest substance on earth you do not have to worry about anything happening to it. All you have to do is to make sure you do not lose it! (and even that can be insured).
3. Inflation Proof
This is actually true to most physical commodities. Real estate, gold, silver and diamonds usually appreciate in compliance to inflation. Unlike the others, diamonds are more durable and movable. This is also why even if you do not want to buy diamonds for investment buy just considering an alternative form for putting some money aside diamonds make a good choice.
4. You can enjoy it while you have it
Since diamonds do not wear off and technically there is no meaning to selling a “second hand” diamond, you can mount it and wear it while you use it for investment purposes.
It is physical. You can hold it, look at it and even wear it. It makes you feel safer unlike stocks and other financial items which are rows on a computer screen.
What are the advantages to investing in Colored Diamonds?
When looking to make an investment, any investment, you need to consider several things including how you exit. Some investors will go ahead and say that it is the most important part of the investment. The first advantage of colored diamonds is exactly that you need to find the right diamond that has enough demand and on the other side of the equation there are only few sellers – investment grade diamonds. Colored diamonds by definition fall exactly into that category. The supply is limited being that only 1 out of 10,000 diamonds is a natural colored diamond and the demand is constantly rising. They are unique and sought after. It seems that the equation keeps tilting the right way and as a diamond investor – time is on your side. The second advantage is that there arei more reasons for colored diamonds prices to increase than in regular colorless diamonds.
There is an expectance for a strong increase in demand for diamonds (all diamonds) from the evolving markets such as China and India where the middle class is growing every year. Regardless, there is also a strong increase in demand for natural colored diamonds in matured and evolved markets that are now getting more familiar with it. Colored diamonds are by far rarer. When we connect the dots, investing
in colored diamonds makes sense.
There are three major risks and disadvantages when it comes to diamond investment.
1. Price Transparency
While other merchandises such as gold and silver have a price index that can be followed and checked in the stock exchange – diamonds do not! There is the Rapaport price list which most diamond dealers rely on but this is not enough on its own. The list is used as a benchmark and even if you can get a copy, it wont be useful for several reasons. It takes into account only the basic factors of carat weight, clarity and color. At the end, the price is determined by the market – supply and demand. Merchants buy certain diamonds above the price list and also below it. A 10% difference means a lot. Also, this list refers only to white colorless diamonds and there is no current list (or benchmark) to colored diamonds. The way to overcome this downside is doing a lot of research. Buy from a reputable merchant of is known to be fair and make sure to compare prices online.
2. Lack of Tradability
Buying a diamond is relatively easy. However, selling one is a completely different story. There are some companies who buy diamonds just as there are some who buy gold but these will pay on the lower side of prices. You can always try and sell it on Craigs list and similar. Or, you can try selling it to other retailers but they will probably be tough negotiators and youll have to beat their supplier either in pricing or in the rarity of your gem. The last option which is reserved to the high-end pieces is trying to sell your diamond through the auction houses. Diamond auctions arranged by Christies and Sothebys are luring lots of diamond investors and collectors. The problem with those is that they mostly accept the unique gems and that their fee is considered expensive by some.
3. Patience is a Virtue
Diamonds are not stocks. There is little to no chance that the value of the diamond you bought will spike 30% the next year (not that it happens too often in stocks as well). Consider the diamonds you bought in the part of portfolio that is intended for long term investment. Remember, good things come to those who wait!
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