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Are Fancy Color Diamonds A Good Investment Vehicle? | April 06, 2021 (0 comments)
New York, NY—Longtime members of the diamond industry remember the investment boom of the late 1970s and early 1980s. Since then, the idea of diamonds as an investment vehicle has periodically reared its head, but has never taken off. And, say most experts, for good reason. Image: the hero stones of Argyle's 2020 Pink Tender.
While diamonds do hold their value better than other luxury products—a key selling point for jewelers—there are compelling arguments against using them as an investment vehicle.
First, even with advances in cutting and polishing, diamonds are not fungible like precious metals or even pork bellies. Second, there’s no instantaneous way to liquidate them, especially for a retail buyer, and most stones will be bought at retail and sold at wholesale. Finally, without proper regulation such as other commodity markets have, diamond investment still is essentially a speculative Wild West.
All that said, however, there are a few categories of diamonds that will bring a good return on investment, such as so-called “mega-stones” (top qualities of colorless stones over 10 carats), and certain intense fancy colors.
Related: Diamonds Or Mutual Funds? How To Have The Investment Conversation With Your Customers
The Fancy Color Research Foundation (FCRF) is betting on the latter and has published a new article addressing the potential of fancy color diamonds as an investment category. The article addresses the long-standing issues mentioned above, as well as price trends in the category, and overall benefits and risks.
Some takeaways from the article:
- Investing in fancy color diamonds can be profitable, but investors need to calibrate their expectations regarding the timeline, expected margins, and the platform through which they can liquidate these diamonds.
- Fancy color blue diamonds have appreciated 241%, and pinks have risen 366% since 2005, and neither category has experienced any significant decreases in value in that time. As such, they’re considered to be the least volatile among traditional and alternative asset classes. Furthermore, as personal, wearable objects they are among the few multi-million dollar assets that can usually be passed down to loved ones without being subjected to inheritance taxes.
- A new proliferation of business platforms to trade and produce short-term profits has emerged, but an efficient and transparent structure or clear investment practice for the category still is not established. Would-be“investment agents” in the category may introduce investment terms that are confusing, inaccurate and unrealistic.
- Collectors’ main motivation seems to be the pleasure of exhibiting their refined taste and celebrating their personal success, and the fact that most mines are or will be tapped out in the relatively near future adds to the stones’ appeal. Australia’s Argyle mine, for instance—the world’s foremost source of top-quality pinks, reds, and purples—closed in November 2020.
Related: Shocking Pink: Argyle Stones Should Rocket In Value After Mine Closes
The full article is posted on the FCRF site. Click here to read.