Buying diamonds as an investment is a smart choice for many reasons. Diamonds are hard to damage or ruin, they can be stored easily and they're in constant demand. But, understanding how to purchase the right diamond is key to making the best investment possible. If you're not a gem expert, how can you know what to look for?
Here's a short guide to get you up to speed on diamond investing.
Learn the 4 C’s
The basics of choosing diamonds are generally referred to as the four C’s. These C’s are color, cut, clarity, and carat. Here's what they all mean:
Color: Few people realize that diamonds come in different shades, generally ranging from colorless to pale yellow. The less yellowish the hue, the more expensive the diamond is.
Cut: Cut, as discussed above, is the process of shaping the gem to a pleasing form. Beyond the obvious appearance, cut affects how brilliant the stone appears to the naked eye.
Clarity: This is a measure of the imperfections—either on the surface or in the structure—in the stone itself. Many imperfections can't be seen by the naked eye but experts can identify them.
Carat: Carat weight is probably the most well-known of all the C’s. Obviously, a larger stone with a higher amount of carats will cost more.
There are specific guidelines for what to look for in each category, so spend some time learning about each category as you plan your investment purchases.
Set a Budget
One key to any investment, especially at the start, is to work with a set amount of money and avoid overleveraging your purchases. Create a workable budget and look for opportunities to buy stones within this budget. You may want to purchase smaller, less valuable diamonds that would be easy to sell as you begin to build and trade on your collection.
When deciding on a budget, it's useful to educate yourself about market prices and trends for wholesale diamonds, loose diamonds and diamonds already set in jewelry. That way, you can create a knowledgeable and realistic investment plan.
Diversify Your Collection
Most investment advisors will tell you that it's important not to put all your eggs in one basket. Diamonds are no exception. These gems come in a variety of colors, cuts and types. Your diamond investments will have the best chance of appreciating in any market if you make use of this variety.
Most investors find the best way to start is by purchasing loose diamonds. At first, look for classic stones in a variety of cuts. Why different cuts? Ring and jewelry trends come and go, so what's hot one year will not be hot the next year. Once you have a diversified portfolio, more experience in diamond trading and a higher budget, it may be safe to start collecting the fancier colored diamonds and rare jewelry pieces.
However, don't be afraid to purchase many less-than-perfect diamonds. They are often easier to acquire, faster to sell and more liquid than rare and expensive stones, so they make a great addition to your investment collection.
Before buying stones, be sure you know where they came from and rely on outside confirmation of the diamond’s quality. You should develop a relationship with a diamond expert who can help ensure that you're getting a reasonable price for the right quality of diamond. Each stone should have a rating from the Gemological Institute of America, and ideally, it should also meet the Rapaport Specification quality standard.
By learning a little about diamond buying and investment planning before you head out to the jeweler or diamond broker, you can help protect your investment and start an exciting new pastime. Contact the experts at Beverly Hills Jewelry Buyers for more information on starting a diamond collection.