Is Diamond Jewelry a Good Investment?
Are you considering investing in diamonds? High quality diamond jewelry can be a part of an investment option in a diversified investment portfolio, but it is not an investment that is wise for everyone. Here are some factors that play into the value of diamonds that you will want to consider before considering making an investment decision.
Outside Factors That Influence Diamond Value
Considering the following factors and doing some basic research can help you make an informed decision about a diamond investment.
Market Fluctuations
While diamonds have intrinsic value and can appreciate over time, their resale value can be less predictable compared to other investments like stocks, bullion, or real estate. The value of diamonds can fluctuate based on market demand, interest rates, economic and geopolitical conditions, and trends in fashion.
Buying diamonds for a long-term investment is a better option than buying them as a short-term investment. With a long-term investment, diamonds have a higher chance of appreciating in value over time. The diamond market has less volatility as a long-term investment than it would when buying diamonds as a potential short-term investment. Overall, you will still need to consider that diamond prices are subject to fluctuations based on the market.
The liquidity of selling diamonds can be more challenging than selling other investments. If you are buying diamonds at retail prices there is a markup to cover overhead expenses and retailer profit margins. This will reduce your potential for making a profit as an investment. It can also be harder to find a buyer willing to pay the asking price you want.
Limited Supply
Natural diamonds are a finite resource which can impact the buying and selling of diamonds. New diamond mines are discovered infrequently, and production levels are carefully managed to prevent oversupply in the diamond market. Plus the diamond industry has invested heavily in market campaigns that increased the desire for diamond engagement rings like the DeBeer's campaign promoting engagement rings in the 1930’s.
Diamond Quality is an Important Part of Diamond Investing
It’s crucial to understand that the quality of your diamond has a direct impact on the demand for diamonds and the price of diamonds. When buying diamonds for investment opportunities (or for your own personal use), it’s important to focus on high quality diamond jewelry for a good return.
Understanding the 4Cs of Diamonds
- Cut: The cut of a diamond refers to how well the diamond has been shaped and faceted to maximize its brilliance and fire. A well-cut diamond reflects light internally and disperses it through the top of the stone which creates its sparkle and brilliance. The diamond cut is graded from Excellent to Poor, with Excellent being the highest quality.
Photo credit by GIA showing an excellent, good, and poor cut
- Color: Diamonds come in a range of colors, from colorless (white diamonds) to yellow, brown. The Gemological Institute of America (GIA) grades diamonds on a scale from D (colorless) to Z (light yellow or brown. Diamonds with intense colors like blue, green, red, and pink diamonds are considered fancy colored diamonds. Colored diamonds are graded separately and can have higher price points.
- Clarity: Clarity measures the presence of internal flaws and external blemishes visible in a diamond. The GIA grades clarity on a scale from Flawless (no inclusions or blemishes are visible under 10x magnification) to Included (inclusions visible to the naked eye). Clarity affects the diamond’s beauty and value, with higher clarity grades generating higher prices.
Photo credit American Gem Society
- Carat Weight: Carat weight refers to the size of a diamond (not the diamond shape- i.e. round, oval, square, pear, etc.) Larger carat diamonds are rarer and generally more valuable than smaller ones, but the factors of cut, color, and clarity also influence the diamond's worth.
Other Contributing Factors of a Diamond’s Value When Investing
Certification
Certified diamonds come with a diamond certificate that provides detailed information about the diamond’s characteristics and serves as assurance of its quality to the buyer. Having certification of your diamond is a must for reselling purposes.
Symmetry and Polish
Diamonds with excellent symmetry and polish display superior craftsmanship which enhances the diamonds beauty and value. Good symmetry and polish help bring out the best in your diamond.
Natural Diamonds Versus Synthetic Diamonds
Each natural diamond is unique with its own inclusions, colors, and characteristics which make them prized for their individuality. Plus natural diamonds are a limited resource. Limited quantities impact availability and price points.
Lab-grown diamonds are generally perceived as being less valuable compared to natural diamonds. Synthetic diamonds are growing in acceptance, but still do not have the same market value as natural diamonds.
Loose Diamonds Versus Set Diamonds
Whether loose diamonds or set diamonds are easier to sell depends on various factors, including buyer preference, market demand, and the specific characteristics of the diamonds and jewelry pieces.
Some may prefer the freedom of loose diamonds for the allowance of custom designs and tailored settings. Others may prefer ready to wear pieces that are well designed and showcased in settings that enhance their beauty and aesthetics. Both loose diamonds and set diamonds have their advantages and decisions made could vary based on individual circumstances and market conditions.
Colored Diamonds
Colored diamonds are much rarer than colorless diamonds which can make them highly desirable among collectors and investors. Colored diamonds exhibit a wide range of hues from subtle pastels to vibrant shades. The intensity and hue of the diamond’s color plus the quality of the cut, clarity, and carat weight still play significant roles in determining the value and the marketability of colored diamonds.
The appeal and marketability of colored diamonds varies based on individual tastes, trends in the jewelry market, and the specific characteristics of the diamond. If you are considering investing in colored diamonds, talk to a knowledgeable jeweler to make an informed decision.
Below is the Williamson Pink Star Diamond which received a record high price at auction.
Vintage and Heirloom Diamond Jewelry
While heirloom diamond jewelry pieces can hold both sentimental and potential financial value, there are still various factors that determine if they are a good investment. If your vintage or heirloom diamond jewelry pieces have historical or cultural significance, this will add to their value. If it is a unique design or connected to a notable event or figure, it may command higher prices among collectors.
The quality and craftsmanship of heirloom and vintage diamond jewelry can influence its potential investment value. High quality diamonds with exceptional cut, color, clarity, and carat weight, as well as finely crafted settings, are more likely to retain or appreciate in value over time. The condition of the heirloom piece will also play into its investment value. Featured below is a vintage Cartier bracelet.
Precious Metals and Additional Gemstones
The quality of precious metals like platinum, sterling silver, and gold jewelry can all influence the value of diamond jewelry. The price of gold can indirectly impact the value of diamond jewelry. When the price of gold increases, it can lead to increases in manufacturing costs which contribute to the overall price of the diamond jewelry pieces.
Additional or surrounding precious stones can also impact the overall value of the diamond jewelry. The use of accent diamonds or colored gemstones like sapphires, rubies, emeralds, etc., will enhance the overall beauty of the diamond jewelry. The quality, rarity, and size of the colored gemstones can influence the value of the diamond jewelry. Featured below are some diamond rings and a diamond bracelet with additional gemstones.
Final Thoughts
Investing in diamond jewelry can offer both tangible and intangible benefits. Beyond the beauty and emotional value that diamond jewelry has, it can have the potential for appreciation over time. If you are considering whether diamonds would be a best investment for you as part of a diversified portfolio, you will want high quality diamonds that have exceptional cut, color, clarity, and carat weight. Following our guide will help you in your search to buy your best diamond for personal or potential investing reasons.
Ultimately, whether diamond jewelry is a good investment depends on your individual financial goals, risk tolerance, and preferences. The value of diamond jewelry is subjective and can vary depending on numerous factors. What one person considers valuable or desirable may not be the same for another, which makes it hard to predict what kinds of returns you may get. Whether buying diamond jewelry as an investment will bring individuals the financial returns they may desire is a question that each person must decide for themselves, depending on their objectives.
Our jewelry store in Scottsdale has the professionals you need to help you make an informed decision. We offer a range of both loose diamonds and set diamonds. Come see us today and we will help you choose diamond jewelry for your personal enjoyment. We are also able to offer you advice about whether buying diamond jewelry is a good investment beyond its emotional and aesthetic benefits.