Is buying a Diamond is good investment option?
“Diamonds are women’s best friend”, this is such a common saying. Their pervasive influence is undeniable but does this statement hold true when it comes to investing in diamonds?
A DIAMOND is a natural and the hardest stone. They differ in their attributes – carat (size), color, clarity and cut (commonly referred as 4 C’s). It is on the basis of these attributes, which determine their price and their feasibility for investment.
Carat: It refers to the size of the diamond. It is denoted in carats and cents. 100 cents = 1 carat.
Color: Color is denoted as D,E,F,G,H and so on…D being the whitest.
Clarity: It refers to the purity of diamond (VVS1, VV2, VS1…and so on), VVS1 being the purest.
Cut: A higher cut grade will have more sparkle and visual appeal.
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From whom should I buy a diamond?
Diamonds can be purchased from any renowned diamond trader. But since it is not feasible for a layman to observe the attributes of a diamond under a magnifying glass it is very easy for a trader to fool the buyer by charging exorbitant prices. Thereby I would suggest you to always buy diamonds from a known dealer whom you can trust.
Are diamonds available online?
Yes, both rough and polished diamonds are available online.
A few relevant websites in this regard are:
YOU MUST MAKE SURE ABOUT THE CERTIFICATION OF DIAMONDS as they would assure you of its genuineness.
How do I determine the price of a diamond?
The cost of diamonds in India is usually evaluated on the basis of Rapa port, which is published weekly. It is an international benchmark for pricing diamonds and is denoted in US dollars. The price of the diamond can be attained pertaining to its shape, size (in carats), color (D,E,F….), Purity (VVS,VS,LB etc.). ‘Better the attribute, higher the price’. However it is a practice in India that the seller would offer you a discount over the Rapa port price which differs seller wise and piecewise (commonly called ‘back’). So if you are planning to buy a diamond do confirm the “back” you are being offered.
Where should I sell diamonds or where will I get the right buyer?
Diamonds do not have a fixed value because of the ‘back’ factor mentioned above. It all depends upon the potential buyer you are able to find. Usually if you are in an immediate need for money, the buyer would take advantage of your need and pay you less than what you would have got otherwise. So I would suggest you to sell the diamond after consulting a few traders or buyers, and finally sell it to the one offering you the best price.
Should I invest in diamonds?
Diamonds are characterized as having a low liquidity and lack of fungibility i.e. its ability to be interchanged with other assets of the same type, which makes their trading and exchange process quicker and easier. The process of determining a diamond’s value is complex because its quality is measured by what the jewelry industry refers to as the 4 C’s: carat, clarity, color, and cut as mentioned above. Basically low liquidity and lack of fungibility makes a diamond less desirable investment. The value of diamonds fluctuates and depends upon market conditions. Since they’re considered a luxury asset, people invest in diamonds with disposable income. Unfortunately, with the current state of the economy, disposable income is scarce.
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Conclusion: I would personally prefer investing in other metals like gold and silver. Gold has sustained a reputation of being a stable and highly valuable asset, especially during times of economic crisis. Even banks offer loan against gold. In light of recent financial uncertainty, investors have been ditching volatile stocks to invest their cash in gold because it’s a safe asset that will most likely appreciate over time. There will always be an instant market for gold because it is fungible, stable, and has high liquidity. If you want to invest a smaller amount you can also consider investing in silver or fixed returns mutual funds at current levels.
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Team – Myinvestmentideas.com
I still somehow feel, while diamond may be considered a good investment option by some, the liquidity and flexibility offered by Gold is way too high and probably more affordable for people than diamnonds. And even if gold fluctuates, the investment should be from a long term perspective to really reap returns. But then its my opinion, and as they say 'to each his own'. 🙂
Thanks for your feedback Aniket. Gold is ever green investment option for Indians, especially for women 🙂
very nice article but if i sell back to the trader from whom i have purchased initially, i dont think so there will be any liquidity issues!
Ideally speaking you should not have any issues Supriya.