Is Diamond Jewelry A Good Investment? 6 Pros And Cons

Diamond jewelry has the highest value among the different kinds of precious metals and stones used in making different kinds of jewelry. Diamonds are very precious sparkling stones that make whatever jewelry they’re set into highly attractive. It is the reason why wealthy and affluent women like to wear their diamond jewelry when they go to social, fashion, or business events.

The most common uses of diamond jewelry are diamond rings, diamond earrings, and diamond necklaces. Most women love to wear diamond jewelry to add some elegant sparkle to their every attire. They’re considered a form of investment because they can store value and preserve wealth. If you’re thinking of investing in diamonds, you might want to read on to gain more information. Here are some of the pros and cons of putting your money into diamond jewelry as an investment.

Pros

There are quite some obvious advantages to owning diamond jewelry, aside from the fact that you can wear whatever jewelry you have in your diamond collection. Here are some of the other advantages of investing in diamond jewelry.

  1. So Much Wealth In So Little

One of the most important advantages of investing in diamonds is that it allows you to safely keep so much value and wealth in such a small thing. A very small diamond stone could be worth thousands of dollars. It is the reason why diamonds have been used as a means of transfer of value since ancient times. You can keep a diamond worth one million dollars in a very small safety vault box.

You can hide your diamonds in a very small safe or storage. No one would ever suspect that you have diamonds in such small boxes or pouches. It also makes it quite easy to carry them around when you’re about to sell them. You can also put your safety vault box or pouch inside a larger bag. No one would think you’re lugging around carats of diamonds unless you go through a thermal imaging scanner.

  1. Secure And Stable Investment

As an investment, diamonds are a secure and stable asset class similar to real estate property, gold, and other tangible precious metals. The price of a diamond is like gold; it’s constantly rising in the market. It may dip from time to time. It is due to the fluctuations in supply and demand. But their price point movements are not highly volatile. And they don’t usually plummet because of fundamental factors such as market crisis or political instability.

The long-term trajectory of the price of a diamond is steadily and constantly increasing in value. It makes a diamond a secure, safe, and predictable investment.

By contrast, cars depreciate the moment they leave the showroom. They may depreciate each year. The prices of stocks can plummet when there’s economic uncertainty or geopolitical conflicts. Governments and businesses can default on their bonds and treasury bills. Banks can close and run away with depositors’ money by limiting the amounts that depositors can recover. Even insurance companies can go bankrupt and fail to pay out their obligations. And finally, cryptocurrencies are wildly volatile.

  1. Highly Durable

Another advantage of diamonds is that they’re made of highly durable materials. Diamonds are generally regarded as the strongest and most durable material that exists on this planet. They won’t be damaged by sea breeze or extreme weather. They won’t even be damaged or break when a truck rolls over them. They don’t have a chemical reaction when exposed to the elements.

Cons

Here are some of the disadvantages of investing in diamonds:

 

  1. There’s No Price Transparency

One of the most important disadvantages of investing in diamonds is that there may be no transparent market price for diamonds. For gold, there’s a global price index that is followed by all traders, buyers, and sellers alike. The gold price index is published in all commodity and precious metals trading exchanges, and the market follows this price in its transactions.

But there’s no such price index for diamonds. Instead, the price of diamonds is based on an informal sense of the current supply and demand situation. Diamond merchants can buy diamonds above the price point, but they can also buy below the price point based on their informal sense of the supply and demand situation.

There’s the Rapaport price which some diamond dealers use as a reference, but a vast majority don’t feel obliged to follow this price point. It’s also not a very useful price index. It only takes into consideration the basic attributes such as weight, color, and clarity. In the end, it’s still the informal feedback of supply and demand that determines the price of diamonds. It makes it a bit difficult and complex to sell diamond jewelry.

 

  1. It’s Difficult When You’re About To Sell

It’s relatively easy to buy diamonds. You can buy from specialty stores and sellers. You can also buy from the local jewelry shops near you. You just have to know what to check and to watch out for when you’re buying diamond jewelry to avoid getting yourself a raw deal. But when it’s your turn to sell, things are a little bit more complicated for diamond owners who intend to sell some of their diamond jewels.

Of course, you’ll be able to find willing buyers and even companies who will buy diamonds. More often than not, though, they’d only be willing to pay much lower than what you thought your diamonds were worth. It is an effect of the lack of price transparency of diamonds. Traders don’t know the real price point, so they’re hedging their risk and buying low. In other words, it’s easy to buy diamonds, but it’s not as easy to trade them.

  1. Price Movement Takes Time

Another disadvantage of investing in diamond jewelry is that its upward price movement takes time. Investments in other assets can skyrocket if a fortunate development occurs. Prices of some startup stocks can suddenly go up, and you can ride the tide if you came in from the ground floor when you bought the shares. Cryptocurrency prices are known to be wildly volatile, and smart traders have been able to cash in on the price swings.

By contrast, the price of diamonds takes slow upward movements and dips from time to time based on supply and demand. Generally, though, the trajectory of diamond prices is upwards, but this will take a long time. For one, the price of diamonds will certainly not go up by 30% in a short period, such as a couple of months.

Those scenarios don’t happen for diamond investors. It means you’ll have to keep your diamonds for quite some time if you want to return on your investments by waiting for the price to go up high enough to earn a neat profit before you sell.

Conclusion

Buying diamond jewelry can be a sound decision for investors and traders alike. But there are both advantages and disadvantages to holding diamond investments. The main advantages are that you can secure so much wealth with so little but highly-durable material. The price of a diamond is relatively secure and stable compared to other assets. The disadvantages are that there’s no price transparency, which makes it difficult to sell. Your investment would also take time before you can reap the returns.

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