Diamond Investing Can Be Complicated, But This is Easy

by Vincent King · 2 comments

You want your proposal to be something your beautiful bride-to-be can never forget. She deserves it — and the ring of her dreams — but you know less than nothing about buying diamonds.

Or perhaps you’re considering diversifying your portfolio, but you get diamonds like your grandma gets Twitter.

Diamonds Are Treasures

People use diamonds for investments, as heirlooms for their families, or for not-so plain bling. Regardless, diamonds are so treasured that many women will even buy them for themselves.

Like all precious stones and metals, the value of diamonds fluctuates and must be seriously considered when thought of as an investment. If you’re only into the bling, you still want to behave intelligently when it comes to buying your diamond.

You can’t just walk into any jewelry store and expect to find a diamond of value that will yield what you want in a hyper-inflated market. Stick to stores like Kay Jewelers and Tiffany’s – diamond specialists with a reputation. You won’t get the best prices, but you will know exactly what you’re buying. If you’re buying online, you must be especially careful to buy only from reputable sites, such as ICE.com.

Of course, that doesn’t mean you can’t get that special engagement ring from other retailers.

Know Your Bling

Once you understand the intricacies of buying diamonds, you can buy confidently from any certified diamond jeweler. Certified jewelers are bound by their certification to sell you a diamond that’s consistent with the stated quality, along with documentation to prove it. We’ll get to documentation in a minute.

In the meantime, here’s what you must remember when buying diamonds, whether for bling or to boost your bottom line.

The 4 C’s

If you’re on a tight budget, a 1 ct. diamond is probably out of your reach. If you’re not bound by budget, you’ll be able to buy this, or bigger. Just know what you’re buying: a .44 ct. diamond instead of a .5 ct. can save you a ton, and the difference is barely noticeable.

Diamonds should be white, so the closer to white you can get, the more brilliant the piece — and the higher the price tag. Categories D, E, and F offer the most sparkle, and are closest to colorless. However, H, I, J, or K look just as good, and the price drops by 25%-35%. The average shopper’s naked eye can rarely tell the difference.

Clarity is self-explanatory. The clearer, the better. F = Flawless clarity and is, obviously, the most expensive. SI1 – SI2 are lower grades on the clarity scale, but still look flawess to the naked eye. They’re cheaper than the upper grades VVSI-VVS2 or VSI-VS2. If you’re looking for a solid investment, you’ll want to stay away from grades I1-I2-I3, as they’re the cheapest, but even non-jewelers can spot their flaws.

Even if you compromise on all the other C’s, don’t skimp on this one. This is the most important of the C’s. Excellent and Very Good should be your only options on the scale for cut. Good, Fair, and Poor should be avoided like your Aunt Marge at the family reunion. The price difference between Excellent and Very Good can be a 10% increase — a good investment by many measures.

Get a Report

The GIA (Gemological Institute of America) and AGS (American Gem Society) are the certification organizations accepted everywhere. If you’re buying from a reputable seller, you must get a grading report (either GIA or AGS) for your jewel. This not only serves as a report of what you’re getting; it’s an identification source for your investment.

Stones and jewelry priced below $500 won’t be GIA or AGS certified. The lowest price you should consider for your investment is between $500 and $1,000, though the average engagement ring costs $3,250.

If you’re shopping for the love of your life, plan on spending about two month’s salary on this symbol of love and affection.

Have you ever considered investing in diamonds?

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  • Ami Elstein says:

    Diamonds are indeed an exciting commodity, and the Waldman Diamond Company has already set up an accessible diamond index for investors on the internet via an Investment Diamond Exchange (http://www.wdcgroup.com/investments/investment-diamond-exchange/). This enables private investors to buy and sell investment grade, GIA-certified, laser inscribed, polished diamond tracking the value of their diamonds so they can decide when to realize their investment. What’s more, because they are offered as a commodity, diamond prices on Waldman’s investment diamond platform are typically 30 to 50 percent lower than the average retail price of polished diamonds.

  • KM says:

    Aside from investing in diamonds (which could be worthwhile), you talk a lot about engagement rings, which is not really an investment. In fact, I think it’s a colossal waste of money that can be spent on other things that a couple would need to start their life together. 2 months salary for a ring? Is that seriously still a rule of thumb? How wasteful. I mean, I understand that some women want to be treated as princesses and that’s fine if someone is willing to do that for them, but I don’t see how that can be a good topic for finance management and saving money – more like the opposite of that.

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