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Investing in diamonds

Investing in diamonds - how much can you earn?

How much can you earn on diamonds? This is one of the first questions that potential investors ask professionals in the field of investing in diamonds.

Price of diamonds

The main factors that affect the price of a diamond are its weight, the quality of the cut, the color and the purity (the presence of unrecognized graphite in the jewel). The mentioned parameters are higher, the diamond is more valuable, and its price is growing faster over time.

The investment diamond is a jewel of at least 1 carat (0.2 g), in brilliant (round), certified by an independent international gemological laboratory. Fashion for investment in diamonds came in the 70s in the United States and to this day the diamond is treated as a "hard currency" to protect capital from fluctuations in economic conditions.

Diamond is an alternative investment - we invest our assets not in a financial instrument, but in a commodity, expecting a favorable increase in its value over time. And it is undeniable that diamond prices are steadily rising and are an interesting solution for a whole bunch of investors.

Trading diamond investment prices are constantly monitored. The two largest institutions involved in the analysis of real buying and selling diamonds are IDEX - International Diamond Exchange and Rapaport. The second mentioned institution, represented by the authority of Martin Rapaport, is a completely independent, objective source of real diamond prices available in the trade, and RapNet is the world's largest online trading platform for these gems.

In turn IDEX is already very close to creating a kind of "diamond index" that faithfully illustrates the market price changes of diamonds, which may be the basis for creating derivatives based on this index. So far, the valuation of diamonds, which, despite the fact that they are raw material, like gold, is extremely difficult to standardize. Changing one of the seemingly insignificant diamond parameters greatly influences its value - two stones of the same size, similar looking, may differ in price several times.

The investment diamonds traded by IDEX and Rapaport are not transparent, but are available only to a small group of interested professionals working in the industry. Even with access to detailed reports and analyzes, we have no right to publish them.

However, we allow ourselves to provide estimates that reflect the diamond's value as an investment over the long term. The average price of 1-carat diamond in D-H color, purity from IF to VS2 and at least a very good quality diamond cut has increased by 32% between 2000 and 2009. This is not an impressive result, however, giving averaged annual return of about 2.8% - this investment has secured a decline in the purchasing power of money caused by inflation, which in the United States was very similar.

Looking at the change in the value of the similarly shaped 3-carat stone, in the last 10 years the jewel has generated nearly 74% of the profit, averaging almost 6% annualized. Investment diamonds with similar remaining parameters, but the size of 5 carats generated a cumulative profit of 134% in the past 10 years - about 9% on a yearly basis.

This is a pretty decent result. Remember that these are average values ​​- looking at the price changes of diamonds with individualized parameters, it can be noted that the prices of certain groups of stones grew even faster. This is a tip for investors to follow their history in the future, as well as invest their wealth in these jewels.

Investment diamond

Last decade shows that investment diamond is an interesting form of investing capital. Investors who feel aversion to risk will also pay more attention to the security of this type of investment - the price of investment diamonds, due to the specific nature of the industry (controlled supply) do not fall regardless of the economic situation. Also featured are the additional unique features of the diamond such as:

- high mobility - ease of transport literally "in the pocket" in another part of the world (as opposed to other alternative investments - gold, art, wine);

- concentration of wealth in the jewel of small size - are we able to hide from the daylight property located in real estate? This is a rhetorical question;

- the same valuation in any country in the world - jewel will be priced against the same parameters.

What future, in the perspective of the next decade, will be the market for diamonds, including diamonds for investment? The diamonds are depleted and it is estimated that their output will fall drastically in the next five years.

Supply is decreasing and it becomes natural that prices, which are so steadily growing, will start to grow even faster. Soon the most beautiful natural diamonds, like natural pearls, will only be available in museums. Is the noble alternative that seems to be investing in diamonds is the right thing to be? History shows that the most so. Forecasts only confirm this.


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