As with any potential investment, investing in loose diamonds has its own unique pros and cons. In short, yes, buying loose diamonds is a great investment as natural diamonds hold their value and appreciate as do most rare and highly sought-after commodities. However, when you start to look into investing in precious stones, it can feel like a minefield (pun intended) as there is no ‘one size fits all’ investment product.
Your best chances of making the best diamond investment can only come from doing lots of thorough research to make the most informed decision you possibly can. This is why we’ve put together this comprehensive guide on everything you need to know about investing in loose diamonds.
To ensure that you are making a wise investment it is a good idea to set yourself a budget. Make sure you are sensible with what you can afford, and then stay closely within that budget.
There is also the cost of insurance to consider, if you plan on your diamond being an investment, it makes sense to mitigate your risk and insure your valuable investment. Factor this cost into your budget when you are doing your loose diamond investment research.
Finding a reputable, trustworthy diamond trader is similar to finding a needle in a haystack when you first start your search. Many diamond dealers come up on a quick online search and so you will need to take your time going through them all, doing your checks and ensuring you choose a reputable company. During your research, find out what you can about their reputation, their inventory (prices), the qualifications and experience of their staff, and read through their Returns and Upgrade Policies. Take note, jewelers are known to sell diamonds at almost double the wholesale price, so it’s vital that you do your own research to make sure you are getting the best price possible.
One of the main benefits of investing in diamonds is that they are easy to store safely due to their small size, unlike other investments like property or vintage cars. You can easily store your diamonds in a secure safe at home. (On a side note, for security, it is a good idea to keep the diamond’s certification separate from the diamond when storing.)
There are many pros to investing in diamonds as they have been known to appreciate if you wait for the right moment in the market, as mentioned above. Another pro of investing in diamonds is the possibility to enjoy your investment, something that can’t be done with traditional stocks and shares investments.
With loose diamonds, you could always decide to turn them into a piece of diamond jewelry to wear every day, so for that reason, it’s worth buying something that you genuinely like and enjoy - especially since it may be a few years before you see a return on your investment.
With that in mind, if you are selecting diamonds to enjoy as a piece of jewelry, perhaps as a diamond ring or pendant necklace, it is definitely in your interest to have an idea about which sort of loose diamond you want. Take the time to learn about the different diamond shapes, cuts, and colors, as some are more popular than others and therefore may be easier or quicker to resell when the time comes.
Another thing to consider if you choose to mount your diamond is that all minor changes in a diamond’s attributes will change the price you can resell for. If you have a diamond that is mounted before certification, that certification would not be accurate and a buyer may ask for the diamond to be unmounted and re-certified before offering a price.
Further, you need to consider the price of the setting as mounting your diamonds to enjoy as part of your jewelry will cost money. Therefore, if a diamond is for investment purposes, it’s important not to spend too much on its setting as settings generally do not hold their resale value.
While there are plenty of pros to buying diamonds for investment, there are also potential cons. As with anything, if you follow a few wise rules of thumb then you will minimize the chance of making a loss when the time comes to liquidate your investment.
For example, you must protect your investment by making sure your diamonds are certified from somewhere reputable like the GIA (Gemological Institute of America) or the AGS (American Gem Society). A Diamond Certificate is a document containing the full scientific and unbiased assessment of a diamond’s 4 Cs; color, clarity, cut, and carat. You need this certification for selling, insuring, or even appraising your diamond. Buying a certified loose diamond as an investment means you will receive an accurate and objective certified analysis that is widely recognized among diamond buyers worldwide.
Strictly for investment purposes, lab-grown diamonds are not a good investment; the synthetic diamond market has been growing steadily for over 50 years and as a result, lab-created diamonds have very little resale value. In fact, due to the flooding of the market, lab grown diamonds typically depreciate in value after they are purchased.
That’s not to say that lab-grown diamonds are a waste of money though. Aesthetically speaking though, the only difference between lab-created diamonds and mined diamonds is their place of origin, when compared, they are exactly the same. When purchased for an engagement ring or jewelry with no intent to resell, lab-grown diamonds are an excellent and affordable choice. You can purchase an exquisite lab-grown diamond for a fraction of the price of a mined diamond.
Most importantly, it pays to be wise about selecting the time to sell your loose diamond – keep your eye on the market to make sure you choose a ‘good time’ in order to get the full financial return. As with any market, this can fluctuate -if you are prepared to ride the wave then you can rest assured that the market will return to what it once was. The independent research firm Edahn Golan Diamond Research & Data reported in July 2021 that “Polished diamond prices are on a near year-long rally, rising more than 18% since last July”.
On that basis, are loose diamonds a good investment? Yes, there will always be a market for resale, but it's up to you to find a good diamond to invest in.
Looking for a loose diamond as an investment? Contact a Diamond Expert at 866-727-0754 or learn more about Brilliance to get started.