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Are Diamonds a Good Investment?

Q Report Team
Updated on March 04, 2024
4 min read

Most people don’t consider buying diamonds until it’s time to purchase an engagement ring, and then the questions begin. Do all engagement rings include diamonds? How do I know if a diamond is good quality? Are diamonds a good investment financially?

A diamond ring might be an investment in your future marital happiness, but the financial question is valid and interesting. 

Like all investments, the results are unpredictable. However, diamonds have unique characteristics that make them desirable as investment vehicles. For instance, they’re small in size but big in value. Also, global demand for diamonds remains strong reasonably consistently. And because diamonds are nearly indestructible, they’re not going to disintegrate over time, even if they sit idly in a jewellery box or safe.

Historical Value

Diamonds are as alluring as they are expensive, and for thousands of years, these sparkly gems have symbolised prestige and wealth. However, until the mid-twentieth century, most engagement rings didn’t feature diamonds because only the very wealthy could afford them.

But as new mines were discovered in the 1970s, demand increased, which accelerated into the 1980s when DeBeers launched its “two-months-salary” campaign. Today, demand for diamonds has only increased, and diamond buyers have a new option: lab-created diamonds. Chemically identical to natural diamonds mined from the earth, lab diamonds are as lovely as their ancient counterparts, though they don’t hold their value quite as well.

Things to Consider When Investing in Diamonds

In your overall financial portfolio, diamonds often fall into the alternative investment category. In other words, diamonds often make up a small portion of your overall wealth. Let’s look at a few crucial considerations.

Buy Rare-but-Desired Stones

If you purchase a diamond as an investment, you may want one you can resell for a good price later on. In other words, a gem that people desire. But you may not want a common diamond. 

For instance, you probably won’t want to invest in a round, one-carat carat diamond because it can easily be bought elsewhere and you’ll have to compete with many other sellers. On the other hand, a special-coloured natural diamond (pink or blue, for example) can be rare enough to attract plenty of attention.

Always Keep the Certification

If you want to resell someday, buy only certified diamonds. Every minor change in a diamond’s attributes increases or decreases the stone’s value, so we highly recommend buying diamonds with certification papers. 

When you decide to sell the diamond, your buyer will want to see the grading report. So protect that document and store it where you can find it later on. 

Mounted vs Loose

More often than not, the person who buys your diamond will have their own agenda for it. Perhaps the buyer wants to hold onto it as an investment, or maybe it will become the centrepiece of a show-stopping engagement ring. This is why you would probably get zero value for the setting.

When the time comes that you wish to liquidate your investment (sell your diamond), the person who buys it will have their own agenda for it. Maybe like you, they buy it for investment, but most probably it will be for a setting that he dreamt of. This is why you would likely get zero value for your setting, and only the diamond itself will be calculated for assessing the value.

But that doesn’t necessarily mean you should purchase a diamond loose or separate it from its setting before you sell. On the contrary, a solid, brilliant setting can be a terrific tool for helping to sell a diamond. Not only can a good setting emphasise the colour, but it can help the buyer envision its true glory. 

However, keep in mind that it’s almost impossible to grade a diamond while it’s mounted. Therefore, an experienced buyer might ask you to remove it from its setting so it can be examined before purchase. 

Price Transparency Can Be a Problem

Precious metals like gold and silver have a price index you can monitor in the stock exchange. Unfortunately, diamonds do not, so you can’t follow your investment’s value easily. There is the Rapaport price list, and most dealers rely on this, but it’s simply a benchmark. It only takes a few basic factors into account (carat weight, clarity and colour). When it comes down to it, a diamond’s value is determined by the market’s supply and demand. 

Lack of Tradability

Buying a diamond is easy. However, selling one is a different story. If you want to sell your diamond to a company that purchases used gemstones, you may not fetch an attractive price. Of course, you can always try to sell it to an individual, but it may be hard to find people who want to purchase diamonds from strangers. 

High-end auction houses might be an attractive avenue, but they often take a significant cut of the proceeds. So before you invest in diamonds as a financial asset, consider how you will sell them in the future.

Valuable Assets Need Insurance

If you decide to invest in diamonds, you’ll need a way to protect them. Whether your investment sits in a safe or flashes its sparkle from the ring on your hand, it faces various risks: theft, damage and loss.

Our Q Report jewellery insurance provides the best possible protection, giving you peace of mind in all situations. So get a free quote for your favourite diamond, and if you have questions, feel free to ring us at 1300 882 018. Talk soon!

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