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How to make a diamond investment

Luxury & Lifestyle 08-04-2017

Nima Suchak looks at how diamonds are fast becoming an investor’s new best friend.

But of recent years diamonds have started to attract the attention of wealthy investors as a commodity investment with potentially high returns. And, while diamonds can certainly be included in a financial investment portfolio, it’s a specialist field.

AWM spoke to Christies’ specialist, Angela Berden, based in Geneva, about how diamonds can become a tangible asset, which is attractive to many investors.

Coloured diamonds or white diamonds?

Angela says that coloured diamonds in particular are reaching dizzying new heights, with the demand for good quality stones such as rare blues and pinks never been stronger. Coloured diamonds are unique in this way and the last six years has seen an upward trend.

“Coloured diamonds are in high demand and in past auctions, achieved strong results,” she says. In November last year, the sale of a rare pink diamond to Hong Kong’s sixth richest man Joseph Lau made headlines. The property tycoon bought the rare 16.08-carat pink diamond mounted as a ring, and renamed it ‘Sweet Josephine’, for his seven-year-old daughter.

“The Sweet Josephine diamond in Geneva, set a new world auction record for a fancy vivid pink diamond, selling for US$ 28.5m, and the 91.81 Fancy Vivid Yellow cushion-shaped diamond which sold in the same sale for US$ 4.2m.” she says.

Do diamonds hold their value?

While diamonds are not traded as a commodity in the same way as gold and other precious metals might be, diamonds are holding their worth and the reputation for them even increasing in value has never been so resoundingly positive. “Each market, including the stock market, is undergoing some fluctuations, but in general terms the diamond market is rather stable,” says Angela. “It is a very healthy market.”

What are the benefits of investing in diamonds?

As rare as such diamonds may be, record prices “show we are dealing with a very healthy stone market,” according to Francois Curiel, chairman of Christie’s Luxury Group. “There is lots of cash in the world right now. At the moment, works of art, diamonds and jewels are a safe haven,” he added.

What to look for in a diamond

When shopping for diamonds, the basic valuation template boils down to the four Cs – Carat (weight), Colour, Clarity and Cut. Colourless, white diamonds are measured on a sliding colour scale in which the rankings are D (the best blue white) and E (exceptional white). Any gem that registers lower than grade H is deemed too yellow. Clarity grades range from Flawless to Imperfect 3. The most important of the four Cs is ‘cut’, because it is the skill of the cutter that gives a diamond its brilliance.

But is there a need to go further for an investment in diamonds? “The four Cs are still the key elements to look at when buying a diamond,” says Angela. “But it is recommended to buy a diamond with a gemological report from an independent diamond laboratory which shows all details of the diamond – from the four Cs to its proportions and individual characteristics.”

Other factors some buyers might want to take into consideration will be cut grade, which analyses quality of symmetry, polish and optical performance; cost reference – the unit of reference used for value; and change in value – each diamond’s classifications appreciation or depreciation over the last year and five years.

How can you ensure you make the right choice when investing in a diamond?

If you are novice when it comes to diamonds, you are without doubt going to need a trusted advisor and guide. First and foremost, getting your hands on a rare gem that will grow in value over time requires the bidder to be in the right place at the right time.
“Following auctions will definitely give an investor a realistic feel of the market and price levels for individual diamonds,” says Angela. “It would also be beneficial to visit the previews and sales to learn about the key points to look at when buying a diamond, and to get a feel for the dynamics of the market,” she adds.

How much to invest?

“Focus on the quality, rather than on the size of the diamond. Be prepared to invest at the top of your budget and do not think short-term,” says Angela.

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