WHY ACQUIRE DIAMONDS AND GEMSTONES?

There are benefits to acquiring this tangible commodity. Knowing both the potential pitfalls and benefits can balance the scales of any potential risks.

Since 2008 the global economy has gone through many ups and downs. The financial crisis of 2008 showed everyone how volatile even the most tangible, long term investments such as real estate can be. Multitudes of people lost everything and had to walk away from their life savings – primarily in the form of equity in their homes. It is during these difficult times that people start to look for alternative, tangible, long term investments. It is also during these times that people appreciate the advantages of physical, portable commodities. Therefore, currency debasement around the world has led to people seeking hard assets – assets which cannot be created by a printing press or the tap of a keyboard; and it is well known that both literally and figuratively, there are not many assets harder than diamonds.

While we do not recommend purely buying diamonds or gemstones either loose or already mounted as jewelry solely for a potential upside, if you do, they should absolutely fall into your category of alternative investments. This means that they should be a very small portion of a diversified portfolio, and not more than you are financially willing to lose. As with any investment, “Diversification is protection against ignorance”, Warren Buffett. However, there are other reasons to acquire diamonds and gemstones, and not the least of which, is the pleasure it brings the wearer and or owner.

Before we dive into the positive and potential negatives of acquiring diamonds and fine gemstones, let’s start with the basics.

Learn the basics about diamonds and gemstones. Regarding diamonds, start with the 4 Cs of Diamonds. Learn how these 4 characteristics affect the value and resale value of a diamond or gemstone. There is much diversity and speculation when investing in diamonds and rare gemstones. Knowing what you are buying requires education and or engaging a trusted professional.

Compare Prices. This takes a little effort since a diamond or fine gemstone’s price is not set by thousands of buyers and sellers bidding online in a transparent platform, as is the case with the stock market. However, with the advent of the internet and online retailers you can easily compare asking prices for similar diamonds. This is more difficult when it comes to colored diamonds and fine gemstones, because of rarity, and the fact that there are less product in the market to compare similarities.

Buy only certified diamonds and gemstones. We recommend only buying diamonds or gemstones certified specifically by the Gemological Institute of America (GIA). With all the synthetic, lab created, and artificial diamonds and gemstones on the market, there is a high risk of fraud without a GIA certificate to verify what you are buying. You can always verify that an accompanying GIA certificate is genuine by scanning the QR code or entering the certificate number into the GIA website. This will also ensure an easier sale when/if you decide to liquidate your diamond or gemstone.

Engage a Professional that you can Trust. It is important to engage a diamond and or gemstone expert. You should establish a relationship with a sophisticated diamond and or gemstone advisor knowledgeable in the nuances of diamond and gemstone quality as well as international diamond and gemstone pricing and markets. Your advisor should also have direct buy/sell trading access to the global diamond and or gemstone markets to ensure fair market value bid/ask pricing. Significant Stones can be that professional.

1. STABILITY
   The price of diamonds and gemstones have continued to increase in a steady, upward trend. Investment bankers, financial institutions, and business analysts who have investigated colored diamonds and rare fine gemstones as an investment class are often surprised by their results, so much so that in today’s versatile market specific stones are considered by many as one of the strongest investment opportunities around.

2. PORTABLE WEALTH
   Diamonds and gemstones have forever been used as an excellent means of transfer. Diamonds and gemstones are small, they weigh very little, and they are extremely portable. Therefore, a very small parcel can convert to significant value and can easily be transported and concealed in emergency situations. In fact,
   historically, when there was a hostile government takeover, war, or some other dire situation where one needed to flee, gemstones were easily concealed and transported without detection. This allowed people to start over in a new city or even country with wealth that may otherwise have been lost in banks or in real
   estate that had to be left behind. In our opinion, in these very unsettling times, this is one of the greatest assets of investing in diamonds and gemstones.

3. DURABILITY
   A diamond is durable. After all, they endured enormous heat and pressure over millions of years, deep in the earth when they were forming. Many fine gemstones are also durable with the proper care.

4. PRIVACY
   Diamonds and gemstones are a highly private asset. They can be easily stored for safe keeping without ever sharing the information publicly. They require no reporting for tax purposes, and can be enjoyed on a daily basis.

5. INFLATION PROOF
   This is true with most physical commodities. Real estate, gold, silver, diamonds, and gemstones usually appreciate in relation to inflation. Unlike the others, diamonds and gemstones are more durable and portable.

6. MULTI-FUNCTION ASSET CLASS
   Diamonds and gemstones possess multiple functions as an asset. The fact that pleasure will be derived from the jewel over time does not detract from the value. With proper care, diamonds and gemstones can be worn and enjoyed while simultaneously being used for investment purposes.

7. PHYSICALITY
   Diamonds and gemstones are a physical commodity. You can hold them, admire their beauty, and even wear them daily. This physicality can give a feeling of psychological security unlike stocks and other financial items which are rows on a computer screen.

Price Transparency
While commodities such as gold and silver have a price index that can be followed and checked on the stock exchange, colored diamonds and gemstones do not. The price of diamonds and gemstones is determined by the market – supply and demand. The way to navigate this is by “doing your homework” and, more importantly, purchasing from a reputable merchant known to be fair.

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 they generally try to pay as little as possible. However, very fine diamonds and gemstones, those that are rare and in-demand, may be sold through the auction houses.

Patience is a Virtue
Diamonds are not stocks. There is little to no chance that the value of the diamond or gemstone you bought will increase in value in the next year. When you acquire diamonds and or gemstones, your cash is going to be tied up for awhile and not liquid (albeit in a very lovely, sparkly manner!). If you need to sell to get your money back you may not be able to recoup all of your purchase price.

At the very least, buy something you love. That way you can enjoy it while you own it, and you won’t be disappointed if it doesn’t increase in value as much as you hoped.

Avoid Lab-Grown Diamonds

These are not natural gemstones and, therefore, are not considered rare, since more can always be made in the lab. There is only a limited number of natural diamonds and gemstones on the planet making them much more likely to increase in value over time.

An Alternative Diamond Investment

If you find that the diamond and gemstone industry is fascinating and believe there is potential to make money from it, yet you do not have the funds nor knowledge to make an investment, there is an alternative solution. You can also invest in diamonds by buying
stocks of diamond-related companies. You can find further information about it in Wikipedia. https://en.wikipedia.org/wiki/Diamonds_as_an_investment

Buy something you love

Before you invest in diamonds or gemstones, make sure your investment meets the following minimum requirements: Price transparency, resale liquidity, market access, quality confirmation, and expert guidance.

Prices of fancy intense pink diamonds of between 1-2 carats:

$10,000/carat for a 1.59 carat Fancy Intense Purplish Pink diamond in 1995

to  $100,000/carat for a 1.59 carat Fancy Intense Pink diamond in 2007.

That is a 1,000% increase in 12 years or 83% annually.

$69,000/carat for a 1.97 carat Fancy Intense Pink In 1998,

 To $95,000/carat for a 2.04 carat Fancy Intense Purplish Pink Emerald shaped diamond In 2002.

$116,000/carat for a 2.08 carat Fancy Intense Pink Emerald shaped diamond In 2005

To $125,000/carat for a 2.05 carat Intense Pink

A price increase of 68% in 7 years. 

The graph below shows a comparison between traditional investments and Pink diamonds between the years 2007 and 2017.

Fancy intense blue diamonds of between 2-3 carats:

Blue diamonds have increased in value almost consistently since 2002:

In 2002,  a 2.18 carat Fancy Intense Blue Emerald shaped stone sold for $180,000/carat

In 2011, a 2.28 carat, Fancy Intense Blue, Marquise shaped stone sold for $400,000/carat.

This represents a 122% increase or 13.5% annual price increase.

Prices for fancy intense blue diamonds exceeding 5 carats are rising as well: 

In 1998, a 5.32 carat Fancy Intense Blue Emerald shaped stone was sold for $285,000/carat.

In late-2007, a 5.04 carat Intense Blue Radiant shaped stone was sold for $570,000/carat,

in mid-2011 a 6.60 carat Fancy Intense Blue Emerald shaped stone was sold for $830,000/carat.

In 2010 a new world record for an Intense Blue was achieved when a 7.64 carat Intense Blue Cushion shaped stone was sold for the amazing price of $1,050,000/carat ($8,000,000 in total).

A modified rectangular-shaped 3.17 carat Fancy Intense Blue diamond with an IF clarity, was sold twice within 5 years at Christie’s auction house.

in 2006 was sold  for $320,000/carat.

The same stone was sold again in 2011 for $755,000/carat.

This is over a 110% increase in only 5 years (22% annually).

What can be gleaned from this data? In general, fancy color diamonds exhibited greater returns with less volatility than most asset classes.

Gold, which is currently on an enormous bull run, is up approximately 495% from its 2001 lows. It has had many corrections during its climb, with corrections of up to 30%. It took
the price of industrial equities, as represented by the Dow Jones Industrial Average, almost seven years to surpass its high set in 2000 and today is still only 6% above those levels. High tech stocks as represented by the NASDAQ are still 46% below their high set in 2000.

Price corrections have been of a much smaller magnitude and rises more pronounced for the fancy color diamonds discussed in the previous five years than in the period preceding it. In fact, since 2002, the entire spectrum of fancy colored diamonds has seen annual price increases from 10% to 35%. Perhaps this is attributable to a greater and broader appreciation of this previously “unknown” market.

Fancy Color Diamonds are not as liquid as gold may be but they perform better in the long run.

One of the greatest advantages is that diamonds are very small and easy to transport, without any records, as opposed to more conventional investments such as real estate, gold, or stocks and bonds.

This game is not only about making profits, but conserving substantial wealth for the future generations. There is also an option to take advantage of the High Security
Vaults that are offered by Malca Amit in Shanghai, Hong Kong, and Singapore.
Another informational article on gemstone investment can be found by clicking the link below:

Finance Monthly – Why You Should Invest In Naturally Coloured Gemstones During Times Of Crisis