Consideration of Diamonds for an Investment
When thinking long term, allocating a small percentage of an investment
portfolio for the purchase of diamonds may provide greater security than
keeping cash on hand. Investors must always keep market volatility and
surprises in mind, but investment-grade diamonds rarely depreciate. Actually,
as less diamonds are mined from the earth and more diamond mines close, the
dwindling new supply increases the demand, and therefore the value, of diamonds
of Investment-Grade Diamonds
to popular belief, diamonds are not an extremely rare gemstone. The world has
an abundance of small, imperfect diamonds. However, large diamonds, clear
diamonds, and flawless diamonds are not often found, and diamonds that combine
large size with clarity and lack of flaws are rarer yet. These diamonds fall
within the classification of investment-grade gems for their rarity and beauty.
When compared with standard diamonds, investment-grade diamonds have greater rarity
and greater purchase prices but also see greater increases in value, also
called appreciation, over time. The ideal quality of diamonds’ four C’s, cut,
clarity, color, and carat, vary between white diamonds and color diamonds, but
investment-grade gems will lean toward the higher, rarer end of each
of Investment-Grade White Diamonds
same grading of standard diamonds applies to investment-grade white diamonds.
The white diamonds considered investment-grade are those displaying great
clarity and color, cut to maximize the diamond's sparkle, and considered larger
than commonly found.
each of the four C’s hold importance, a white diamond's cut is the
characteristic with the most material influence on a diamond’s beauty and
value. The fire and sparkle prized in investment-grade white diamonds come from
the details of the cut. Often confused with shape, the cut refers to the
proportion and finish of a diamond and receives an assessment of Excellent,
Very Good, Good, Fair, and Poor. Investment-grade diamonds should have a rating
of Excellent, Very Good, or Good. Avoid Fair and Poor cuts as the diamonds are
either cut too shallow, which lets light leak out of the bottom, or too deep,
which allows light to leak out of the sides. Investment-grade diamonds are cut
to allow light to reflect back out of the top and minimize leakage. The
diamond's cut is the hardest to evaluate for a layman, thus the importance of
relying on a jewelry professional to assist with selection.
white diamond’s color assessment falls between the letters D and Z in the
alphabet. The letter D, the highest quality on the color spectrum, indicates a
diamond has zero color, and the letter Z indicates the greatest presence of
color that falls within the white diamond category. As the absence of color
raises a diamond’s value and appreciation potential, investment-grade diamonds
hold a color assessment of D, E, F, G, or H.
refers to the weight of a diamond, and one carat weighs 200 milligrams or .20
grams. Larger diamonds, those with a greater carat weight, are rarer than
smaller diamonds, so a diamond’s value rises in proportion to its carat weight.
Investment-grade diamonds with the highest potential for appreciating are those
weighing .75 carats or better.
diamond’s flaws gain visibility in the absence of color, so clarity largely
affects the value of white diamonds. This holds true even if the flaws are not
visible to the naked eye. Purchase investment-grade diamonds with a clarity
assessment of Flawless (F), Internally Flawless (IF), Very Very Slightly
Included (VVSI), or Very Slightly Included (VSI) for maximum appreciation
potential. For investment purposes, avoid diamonds designated Slightly Included
(SI) or Included (I). Rarely do these diamonds see an increase in value.
of Investment-Grade Fancy Color Diamonds
white diamonds that combine high-end characteristics are rare. The rarity
factor increases when applied to fancy color diamonds over white diamonds. In
fact, rarity places almost every fancy colored diamond within the
investment-grade category. Consider this: Only one carat of every 10,000 carats
mined from the earth are fancy color diamonds. Although rarity alone deems
fancy diamonds valuable, the four C’s of diamonds still apply, albeit in a
particular order of importance. In order of contribution to value, colored
diamonds are appraised according to color, carat, clarity, and cut.
of color raises the value of white diamonds, but respecting color diamonds, a
diamond’s value increases according to presence of color. The more vivid,
intense, and deep is the color, the greater the diamond’s rarity and,
therefore, value. Fancy color diamonds receive a color ranking according to intensity
of color. Colored diamonds fall within one of the following classifications,
listed from least intensity to greatest intensity: Faint, Very Light, Light,
Fancy Light, Fancy, Fancy Intense, Fancy Vivid, Fancy Dark, and Fancy Deep.
Only consider color classifications that include the word fancy when purchasing
investment-grade color diamonds. The Faint, Very Light, and Light
classifications more truly fall within the lower-end of the white diamond color
scale than the fancy diamond color scale. Regardless of intensity, different
colors offer varying degrees of rarity. Be aware that brown and black diamonds
do not fall within the range of fancy diamonds and are not investment-grade
The rarest of colored diamonds, red
diamonds have the highest value based upon color alone. These diamonds also
offer the greatest potential for appreciating value - a red diamond’s value may
double in five years or less.
Blue diamonds closely follow red on the
rarity scale. At times, the market has seen blue diamonds’ value double in five
Slightly less rare than blue diamonds, pink
diamonds may double in value in six to seven years. With larger carat weights,
pink diamonds appreciate at the same rate as blue diamonds.
Yellow diamonds have the least rarity among
fancy diamonds but still have greater rarity than white diamonds. When the
intensity of yellow falls within the fancy range, a yellow diamond may double
in value over eight to 10 years. Note that any value appreciation mentioned
only relates to what has occurred in the diamond market, which may or may not
with white diamonds, rarity increases with carat weight. The carat weight of a
diamond plays the second largest role in determining a colored diamond's value.
However, a smaller color diamond often has a higher value than a larger white
still important, clarity factors less in fancy colored diamonds’ valuation than
white diamonds’ valuation. This has a valid rationale: The color in fancy
diamonds, especially those with deep intensity, often hides inclusions. The
same flaw visible to the naked eye in a white diamond may be difficult to
detect in a colored diamond. A colored diamond’s clarity will affect its value,
but it has less impact than color and carat.
colored diamonds do not have a separate cut assessment, do not judge colored
diamonds by a white diamonds cut quality. The best cuts for investment-grade
color diamonds are cuts that draw the light deep within the stone to enhance
and deepen the color. Cuts deemed excellent for white diamonds do not highlight
the natural beauty of colored diamonds.
maximize the potential for appreciation, most investment-grade white diamonds
are round brilliant cuts, and investment-grade fancy color diamonds are square,
radiant, or oval. There are, of course, many exceptions to these generally
of Investment-Grade Diamonds
a paper certificate for a diamond increases greatly its potential for increased
value. The certificate offers physical proof that the diamond has received an
appraisal by a reputable, unbiased entity such as the Gemological Institute of
America. In addition to verifying and validating the qualities that determine a
diamond’s value, the certificate, by detailing blemishes and inclusions, may
help identify a specific diamond in the event of loss or theft.
the Diamond from the Setting
diamonds can be purchased as loose gems or in a piece of jewelry. If the
diamond features in a piece of jewelry, have the diamond appraised
separately. The value of precious metal settings and any stones surrounding a
diamond may depreciate or remain constant while the investment-grade diamond
appreciates, so knowing the value of the diamond alone provides investors with
an understanding of how their initial investment truly stands.
investments are subject to the whimsical nature of the market and to
fluctuations in supply and demand. Investment-grade diamonds, however, rarely
fall in value. Even if the value does not greatly rise, when these diamonds are
liquidated, investors rarely see a reduction from their initial purchase price.
In a worst-case scenario, investors break even rather than see a profit, but
they do not see a loss.
For further questions or information, contact Jewelry Factory president, Bruce Spiegel
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