RARE FANCY COLOURED INVESTMENT DIAMONDS: Fact or Fiction?
Written by Clinton Beck – President of Beck Gold & Diamond Brokers
Dazzling in hue, fancy colored diamonds are undeniably captivating. As a seasoned diamond broker, I often find myself fielding questions about the viability of these precious gems as an investment. Here’s my unvarnished take on it: blending the terms “investment” and “diamonds” paints a risky picture. Here’s why:
1. The Pricing Quagmire
Like any worthwhile investment, turning a profit hinges on buying low and selling high. The primary stumbling block? Retailers often mark up these investment diamonds similarly to how jewelers mark up jewelry pieces. This hefty markup means immediate loss for the investor.
Consider This: A 1 Carat Fancy Yellow Diamond retails for $20,000. However, its wholesale value is only $10,000. Right off the bat, an investor starts at a 50% loss, a far cry from the meager 5% commissions on other investments like stocks or bullion.
2. The Long Wait
For those seeking quick returns, diamonds are a waiting game. Historical price movements don’t match the lofty projections from some sellers. The consensus among experts? Most of these claims are driven by speculation, not solid data. The reality is that seeing a decent ROI on diamonds might be a dream reserved for your future generations.
3. The Hidden Overheads
Keeping your diamond investment secure isn’t free. Insurance premiums add to your costs, further pushing the breakeven point.
4. Liquidity & Disposal Challenges
Liquidity, or the ease with which an asset can be converted into cash, is a cornerstone of good investments. Here’s where diamonds falter. The secondary market isn’t easily accessible to individual investors. For a broker like Beck Gold & Diamond Brokers to be interested, we’d want to buy below wholesale, putting more pressure on your potential returns.
Liquidating through auctions? Get ready for steep commissions, sometimes up to 25%. Selling privately presents its own set of challenges, making diamonds an illiquid, high-risk investment.
5. The Risk Factor
If there’s one term to describe diamond investments, it’s “high-risk.” Many investment experts echo this sentiment, cautioning that rare fancy colored diamonds, while beautiful, are a speculative venture. Most seasoned advisors steer clear of such volatile investments. They’re suitable only for the most astute investors, who should cap their exposure to such assets at 3% of their total portfolio.
In Conclusion:
While fancy colored diamonds might dazzle the eye, they’re not for the faint of heart—or wallet. They’re a gamble, and like all speculative investments, should be approached with caution. If you’re feeling particularly adventurous and wish to dabble, tread carefully. But always remember: there are far more stable and secure investment avenues out there.
