Updated: May 27
Ask this question to someone from the last generation and you will see them frowning.
How can they be blamed? For a long time, we considered yellow gold – solid yellow gold of the highest purity – as the best investment option. Stone-studded jewellery, such as diamond rings, diamond earrings, etc., is typically made in gold which is mixed with some alloy to make it stronger and less malleable, such as 18kt or 14kt. Naturally, it never caught the fancy of wise investors. They, on the other hand, considered it unwise to put their money in anything other than gold. But people have changed; so have their investment patterns.
Do you plan to make precious jewellery an investment option?
If yes, then you can make diamonds a part of your investment portfolio. According to industry players, diamonds offer good returns. Most importantly, they have witnessed a steady price appreciation in the recent years. However, like other forms of investment, they have their own pros and cons. As an investor, you should be aware of these to get the most out of your investments. Here’s everything you should know about diamond jewellery before you invest in it.
How much do diamonds appreciate per year?
Diamonds do appreciate, just as gold. As a matter of fact, according to CNBC, some diamonds have appreciated 20% each year for the past 20 years. That's right.
And how much have diamonds gone up in the last 10 years?
Historical data shows that diamond prices have increased on average 16% per year, over the past 10 years.
The Pros of Buying Diamond Jewellery as an Investment
Over the last few years, the use of diamond jewellery as an investment tool has seen a rapid increase. Several factors make it a good investment option as compared to gold.
Size: The first and the most obvious advantage it has over gold is its size. Unlike gold bullions, diamonds don’t take a lot of room. These precious gemstones were used as a great means of money transfer since a long time ago. A diamond trinket, no matter how small it is, costs double or triple compared to gold jewellery of the same size. This means diamond ornaments, whether it is diamond bangles or necklaces, make good investment options.
Storability: With small size comes great storability. So much that you can keep a diamond worth hundreds and thousands of rupees in even a small safe. Also, diamond jewellery is an investment one can see, hold, and wear. As a result, many people feel it’s a safer bet than stocks and other digital investments.
Durability: The durability of diamonds is another advantage they have been naturally bestowed upon. It is the hardest thing on planet Earth. You can be sure that nothing will happen to it. You don’t have to worry about diamond jewellery wearing off as long as you take good care of it. This means you can wear your investment and enjoy it as long as you want.
And if you are worried about losing it, you can insure it too. (Contact us to know more about how to insure your diamond jewellery). Diamonds are also inflation proof, just like other physical commodities, such as gold, silver, and real estate. However, unlike other physical commodities, diamond jewellery is a more movable and durable investment. Other than the physical aspects and psychology behind diamond jewellery as an investment, they also have financial benefits.
What Are the Risks and Cons of Investing in Diamond Jewellery?
Keeping all the benefits aside, there are also risks involved in having diamond jewellery as an investment.
Lack of price transparency: The first is the lack of price transparency. While commodities such as gold have a popular price index that you can follow, none of that exists for diamonds. The price of diamonds depends solely on the market based on the demand and supply.
Lack of tradability: The second risk of buying diamonds as an investment is the lack of tradability. Buying diamond jewellery is a lot easier than selling them. Some companies do buy them, but the price they are willing to pay will be lower than the price you bought them for.
Long-term benefits: Guess what’s the most testing of all the cons of investing in diamond jewellery? You need to have the patience to reap its benefits. Diamond ornaments are not great tools if you are looking for quick returns or as a short-term investment. If you are ready to wait for the gains, you can make them a part of your long-term investment portfolio.
Guidelines to Keep in Mind before Investing in Diamond Jewellery
It goes without saying that diamond jewellery is a good investment option. However, it should make only a small portion of your investment portfolio. It is a great choice to include in your alternative investments category. You can reap their benefits as long as you are aware of the basic guidelines of investing in them.
Learn the basics: The first thing to do is to understand the four Cs, namely Cut, Color, Clarity, and Carat. The fewer the imperfection a diamond has, the higher is its clarity grade. It’s a diamond’s cut that controls its brilliance, which means, better the cut, more the sparkle. Carat is the measure of the weight of a diamond. The last C is the colour of the diamond, or rather the lack of it. White or colourless diamonds have the most value.
Set a budget: After you have understood the basics of diamonds, set a budget you would like to invest. Remember that diamond jewellery should not be your only investment in your portfolio but a part of it. It is true that you will require a much higher amount initially. But make sure that it doesn’t go over your budget when you decide to invest in diamond jewellery.
Make the purchase: Once you have fixed your budget, compare prices with different online retailers. The next step is investing only in certified diamond jewellery. Riddhi Diamonds always provides you with certified diamonds jewellery. Having a certified diamond jewellery is important while both buying and selling it.
Common Mistakes to Avoid While Investing in Diamond Jewellery
The first mistake that most investors make is to expect too much in a short term. Always remember that diamond jewellery is not a get-rich-quickly plan. Diamonds increase in value over time and don’t offer short-term results. In fact, like other physical commodities, the price of diamonds fluctuates from time to time.
The second mistake people often make is to pay too much. The first rule of investing is buying low and selling high. That applies to diamonds too. However, buying low is rarely an option when it comes to diamonds. Do your due diligence to avoid overpaying. The best way to do this is to check the charge of diamonds per carat that is being applied by a retailer for their basic diamonds.
The third mistake to avoid is buying the wrong diamond. This is where the certification plays an important role. Whether you are buying an engagement ring or a pendant, ensure you are getting only certified diamond jewellery.
Diamond jewellery as investment offers a lot of opportunities provided you do your homework. They are beautiful investment options as long as you don’t buy them to resell immediately. They diversify your investment portfolio while giving you access to some of the best jewels in the world of jewellery. Consider the pros, cons, and guidelines to stay ahead of your game.