Investment in Diamond

Is investment in diamond a good option? Well, answer can be both Yes and No. It will depend on investor’s financial objective and as well as basic knowledge of diamond characteristics like 4 Cs.

After reading this page you should be able to identify whether diamond can be an investment option for you or not.

People’s sentiments towards diamond have changed with passage of time. In ancient times, it was considered sacred and was used to decorate statues of deities.

Around 14th – 16th century, diamond was not only used in jewelry, but was also treated as Amulet. With advent of 19th century, diamond became synonymous to jewelry. For more, read diamond history.

But nowadays, with changing mindset of consumers, diamonds are being seen as good investment option. People are buying diamonds not just for adornment purpose but also for making quick money.

Diamond will not pay you dividend or interest every month for a given period, but there is definite increase in its intrinsic value over the period of time.

If you are aiming for a secure investment then diamonds are great way to diversify your portfolio as tangible assets. But before that read pre-requisites of diamond investment.

Diamond can become good investment only through proper education and research. I have provided below the holistic picture of investment in diamond along with its advantages and disadvantages. But, readers are requested to do a proper market research before doing any investment.

Advantages of Investment in Diamond

  • Increase in Demand: Popularity and demand of diamond is rising all over the world. There is continuous increase in number of high net worth individuals in emerging markets like India and China leading to increase in its demand. The economic boom in these countries gave birth to new upper middle class leading to high demand in good quality diamonds. This rise in price is based on demand and is here to stay.
  • Price Stability: Price of diamond is generally stable and is not affected by inflation, international financial crisis, market collapse, currency reforms etc. It’s generally observed that in turbulent times, value of real estate dips while there is notable increase in value of diamonds.
  • Low Maintenance: Diamonds are hardest natural substance and are highly durable. If you take proper care of your diamond then there is no loss or erosion with passage of time and less maintenance cost is involved.
  • No Depreciation in Value: Luxury items like cars, furniture, etc require maintenance and depreciate over period of time. On the contrary, price of diamond appreciates with time. The reason being, supply of diamond is not increasing in same proportion as its demand, after all not many major mines are being discovered around the world.
  • Anonymity: Not much paper work is required at the time of buying diamonds. So, it can be said that this provides financial privacy. Also, diamonds in most of the countries are tax free and you don’t have to pay tax on capital gains.

Disadvantages of Investment in Diamond

  • Less Liquidity: It’s difficult to sell diamonds in times of urgent need. Though, diamonds have more liquidity than real estate but have less liquidity than fixed interest securities and bonds, and even gold. Quite often, process of selling diamond takes time because a buyer is needed who may buy what you are willing to sell. It’s easy to sell to established jewelers but they may purchase your stone at a price lower than it’s worth.
  • Price Variation: The price of diamond depends on many factors like 4 Cs (cut, carat, color, and clarity) and diamond shape. As gold has fixed universal price per gram, it’s easy to sell gold anytime and anywhere, whereas in case of diamond same does not holds true.
  • You lose premium you paid: When you buy from a reputed jeweler, you also pay premium for its brand value and the trust factor associated with its name. You lose this premium at the time of selling as you don’t offer any brand value.
  • High Investment: If you are looking for diamond as investment, then it will require large capital. An investment in $10,000 diamond ring will give more return on investment than a $1000 ring.
  • Less Awareness: Generally, before any investment we compare with what others have paid for the similar product, like you compare for similar cars or real estate. Such a comparison is not possible in case of diamond. This is because people are often not so open about their investment in diamond.
  • Loss due to Setting: You may have invested in a diamond ring with a particular setting of your choice (e.g. Prong Setting). But at time of selling, buyer may not likely pay for your setting of choice because he may have is own taste. So, ultimately you will be in loss as you won’t get anything for setting.

So, it can be said that, diamond can be an investment choice if you are not looking for quick cash benefit but want something which will eventually appreciate in intrinsic value and is secure.

Those, who like the idea of investment in diamond, before proceeding further please read pre-requisites of diamond investment.

Disclaimer: Diamond– is not responsible for any losses or profit made directly or indirectly by investment in diamond. Purchase of a diamond must be done carefully through proper study and professional consultation is highly recommended.

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