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Investment Diamond Advice

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tradegold33

Rough_Rock
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Jan 10, 2010
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I am looking to purchase one of these two pieces as an investment diamond. Both pieces are high quality stones and are priced the same. In the long term, which stone will appreciate more and will have a higher resell value? Any insight to help me chose between the two would be greatly appreciated. J


1. ROUND
Carat 1.01
Colour F
Clarity VS2
Total Depth 62.40
Pavilion Depth 0.00
Table 55.00
Dimensions 6.43*6.39*4.00
Polish EX
Symmetry EX
Fluorescence NONE
Cut ID H&A
Cert GIA


OR


2. EMERALD
Carat 1.50
Colour F
Clarity VS2
Total Depth 64.00
Pavilion Depth 0.00
Table 67.00
Dimensions 7.73*5.72*3.70
Polish GOOD
Symmetry VERY GOOD
Fluorescence FAINT
Cut ID
Cert GIA
 
Neither one.

Before you make an investment, be it diamonds or anything else, do some research into how you are going to sell at the end. It’s harder than you think to resell diamonds and you are probably going to take a substantial hit for the transaction costs. This usually is more than enough to wipe out any gains and then some, even if you hold onto the stone for years.

By the way, there are several details that give me pause in your descriptions. GIA doesn't assign a cut grade of ID, they don't use the term H&A at all, and they don't have a cut grade of any kind for emerald cuts. 0.00 is not a valid pavilion depth, GIA describes table and depth percentages with only one decimal place and the calculated depth percentage on stone #2 doesn't match the dimensions given. Are you sure these are really GIA graded stones instead of being graded by a GIA graduate (which is a VERY different thing).

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 
Thank you denverappraiser for the reply and valid points!

Neither one. Before you make an investment, be it diamonds or anything else, do some research into how you are going to sell at the end. It’s harder than you think to resell diamonds and you are probably going to take a substantial hit for the transaction costs. This usually is more than enough to wipe out any gains and then some, even if you hold onto the stone for years.


By the way, there are several details that give me pause in your descriptions. GIA doesn''t assign a cut grade of ID, they don''t use the term H&A at all, and they don''t have a cut grade of any kind for emerald cuts. 0.00 is not a valid pavilion depth and GIA describes table and depth percentages with only one decimal place. Are you sure these are really GIA graded stones instead of being graded by a GIA graduate (which is a VERY different thing).


Thank you Neil for the quick reply and valid points!

I am fully aware of the challenges involved in reselling diamonds. This is not my first aquisition and I have my reasons for purchasing the piece.

In respect to the description: I retyped it and hence the typos. The certificates GIA''s and the cut of the round is classified as excellent. The dealer calls the cut "ideal H&A" and the Emerald''s is considered "Ideal" cut.

Now to the main question, which stone would you choose between the two? Thansk again! J
 
Pardon my ignorance, I am not sure how a 1 to 1.5 ct diamond can be a good investment piece. It seems like any profits you make although unlikely isn''t really worth all the trouble. I would just buy the diamond you like better - hard to compare a round with an emerald.
 
It is my belief that neither stone will prove a meaningful investment if you are looking for a realy, post inflation, return on what you choose to invest in. I''d bet on gold to out perform diamonds. You buy diamonds for enjoyment and they have a history of retaining some value, but there is nothing history shows us that proves they are a good long term investment in the size and type of stone you have selected. Truly large, super-fine and rare diamonds "might" do well over the years and might perform reasonably well, but in the 1 carat range, there is little rarity and support of value as an investment is rather limited.
 
Date: 1/10/2010 4:28:08 PM
Author: tradegold33
Thank you denverappraiser for the reply and valid points!


Neither one. Before you make an investment, be it diamonds or anything else, do some research into how you are going to sell at the end. It’s harder than you think to resell diamonds and you are probably going to take a substantial hit for the transaction costs. This usually is more than enough to wipe out any gains and then some, even if you hold onto the stone for years.



By the way, there are several details that give me pause in your descriptions. GIA doesn't assign a cut grade of ID, they don't use the term H&A at all, and they don't have a cut grade of any kind for emerald cuts. 0.00 is not a valid pavilion depth and GIA describes table and depth percentages with only one decimal place. Are you sure these are really GIA graded stones instead of being graded by a GIA graduate (which is a VERY different thing).



Thank you Neil for the quick reply and valid points!


I am fully aware of the challenges involved in reselling diamonds. This is not my first aquisition and I have my reasons for purchasing the piece.


In respect to the description: I retyped it and hence the typos. The certificates GIA's and the cut of the round is classified as excellent. The dealer calls the cut 'ideal H&A' and the Emerald's is considered 'Ideal' cut.


Now to the main question, which stone would you choose between the two? Thansk again! J
Click to expand...
OK then. Since we agree that the hard part is in the selling not the buying, and presumably you’ve got that part covered, the answer is simple. Buy the one that will most cater to the needs and desires of your customers.

I'm a big fan of diamonds and there are plenty of good reasons to buy them. It's just that 'investment' ans mentioned in the headline isn't generally one of them, at least not in the usual financial sense. Don't go into a diamond deal expecting ever see your money again. You mention that this isn't your first acquisition. That's a curious statement since the subject is investments and since we both agree that the hard part is on the other end of the deal. How's it going with dispositions?

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 
Thank you everyone for the feeback. The conesnsus is clear and got me thinking about the long term ''investment plan". Will i be better of sticking to acquiring D-IF pieces in order for them to appreciate in value over time?

Thank you again for the suggestions.
 
Date: 1/10/2010 5:30:44 PM
Author: tradegold33
Thank you everyone for the feeback. The conesnsus is clear and got me thinking about the long term ''investment plan''. Will i be better of sticking to acquiring D-IF pieces in order for them to appreciate in value over time?


Thank you again for the suggestions.
Click to expand...
Financially you will be better off with cash in the mattress.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 
As a matter of fact I am looking to get rid of the cash in the matress :-) Gold is to expensive and I looking for alternatives. Diamonds at wholesale prices make sense. Not looking to waste anybody''s time here, but any other ideas?
 
Put it in a high interest saving accounts? Invest in the stock market?

I think both those options will give you a chance at a better financial gain. I think what people are telling you is that diamonds are not good investment unless you get something very rare - ex. 50 ct green diamond. A D IF is not meaningful especially in the 1 ct range - I would guess you would be hard press to find a buyer for a D IF in the 1 ct range. People would rather sacrafice clarity and color for size.
 
Really, listen to everyone here. These diamonds, even if they were D IF, would not hold their value enough long term, especially when coupled with the transaction costs, to make it a worthwhile investment at all.

Diamonds at "wholesale" prices don''t make sense for a consumer. Trust us.
 
Thanks guys. End of discussion.
 
Date: 1/10/2010 5:37:32 PM
Author: tradegold33
Diamonds at wholesale prices make sense.
Click to expand...
Can you explain to me how this makes sense? Even if you can buy at ‘wholesale’, whatever that means, you are unable to SELL at the same market level. The haircut you take on resale can easily be as much as 75% and it's nearly always over 25%. In investment terms, that's a whopping back end load.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 
Date: 1/10/2010 5:46:15 PM
Author: tradegold33
Thanks guys. End of discussion.
Click to expand...
I’m disappointed, but not surprised, that the OP decided to check out of this discussion. It really is an important question and lots of people are interested. Diamonds are expensive and seem to get more so every year, they’re easy to buy, store, and transport, and they aren’t perishable. It seems like an easy way to stash some wealth in uncertain times. As with all things, the devil is in the details and, in this case, the details are in the marketplace.

What is wholesale? In classic usage, it’s the price that dealers pay for their goods for resale. That’s an easy enough idea and it’s occasionally a useful concept but it comes apart in the diamond business for several reasons:

a) Not all dealers pay the same prices for their goods.
b) Not all dealers carry the same kinds of goods.
c) Dealers do not pay the same prices for identical goods from different sources.
d) Dealers do not pay the same prices for the same goods under all circumstances.

These differences can be considerable. The circumstances when a dealer will be willing to pay the highest prices is when they are buying a stone with very narrow requirements, they want to buy it on consignment with very short notice and with added features to the deal like financing, return privileges, and advertising support . When they will pay the lowest prices is when they are buying from an unknown and possibly unreliable source, when the terms of the deal are cash on delivery with no recourse, and when they don’t have a customer lined up yet to buy it from them. Inventory cost is the curse of diamond dealers and no one wants to take into inventory unless they are confident they can move it along quickly. How much they’re willing to tie up in what kinds of goods will vary from one to the next and will depend on things like how much cash they have, what their current inventory levels are like and what goods are doing well through their distribution channel at the moment. Again, these differences are considerable.

As a private seller or ‘investor’, you are almost certain to be selling in that bottom category unless you can sell directly to a consumer who wants it. That is to say, unless you can retail it. You’re ability to retail it will depend on your own skills at this sort of thing, your own access to customers and a bit of good old luck. If you’re good at it then you ARE a jeweler, no matter how you choose to describe yourself, and if you suck at it you’re a collector.

As a private buyer you’re usually on the other end of the spectrum. A majority of the diamond dealers out there describe themselves as ‘wholesalers’ and will get you anything you want for ‘wholesale’ prices. That is to say, you tell them what you want, they consign it from some 3rd party who they know has it based on your specs for just long enough to make the deal and they pass it along to you after applying their markup. If they’ve got a fancy showroom they usually call themselves a jewelry store and if they work out of an office or a website they call themselves a wholesaler, broker, cutter, importer, investor, or nearly anything else to avoid the word ‘retail’ but the difference here is one of décor and advertising, not the gestalt of the deal.

As a shopper, the solution is twofold. First, shop based on the merits of the deal at hand, not the way the seller chooses to describe themselves. 'Wholesale' is meaningless in this business. Secondly, don't go into a diamond deal expecting to ever see your money again and budget accordingly unless you're planing on being a jeweler yourself (Note: Jewelers are going out of business in droves right now). This isn't entirely correct and diamonds are actually better than nearly everything else you buy but going in with the correct attitude makes the money you get on resale a bonus rather than making the money you didn't get a problem. Calling diamonds a better investment than clothing, cars, food, electronics and whatnot is pretty faint praise.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver
 
Date: 1/10/2010 4:44:06 PM
Author: CharmyPoo
Pardon my ignorance, I am not sure how a 1 to 1.5 ct diamond can be a good investment piece. It seems like any profits you make although unlikely isn't really worth all the trouble. I would just buy the diamond you like better - hard to compare a round with an emerald.
Click to expand...
Ditto - when I hear the term "investment piece" I think 5ct D FL... and I'm not going to be investing anytime soon, with that sort of definition
3.gif



Interesting points, Neil.
 
I''d just like to bring up the issue of taxes. I''m pretty sure gold, diamonds, other commodities etc, are taxed at ordinary income. So if you''re interested in investing it may make sense to do so through something like an exchange traded gold fund while keeping that fund in a non-taxable account, probably an IRA. Taxes can really eat up any gains if you''re buying/selling them often (rather than holding on for the long run). So with the tax situation the risk/reward changes in my opinion. Maybe there is a diamond fund, I don''t know.
 
Diamonds sure beat Shearson Lehman stock as an investment. Or real estate in the last five years. Not too mention all the Madoff type ponzi investments.

To the original poster, between the two choices, the round far and away beats the emerald cut as an investment (shudder to use the word). Hundreds of round diamonds will change hands for every one emerald cut. The round appeals to a far wider market.

You have to think of diamonds like you do art when thinking of them as an investment. They are not liquid commodities in the sense of gold bullion coins, for example. They have to be sold, which takes savvy and effort.

Still though, I know plenty of people that would prefer to own a half million dollar parcel of diamonds than a half million dollar piece of real estate. They're portable, with no maintenance, recognized the world over for having value.

The trick is realizing the greatest value is by selling to the same market that the dealers do, the public. Undercut the dealers to an interested buyer with a quality stone and you will make a sale. It happens every day on Ebay, Craigs List and the local classifieds.

As a luxury tangible asset that you can wear and enjoy for years and then sell, diamonds are tough to beat. Whether or not they are an investment depends on if you are a smart seller willing to invest the time to sell your diamond through the channels which will realize you the most money.

Most people aren't willing to do this, so to them diamonds are a lousy investment.

And secondly, looking at it from a survivalist stance, what other commodity can you stuff millions of dollar worth into a sock? Excluding high end colored stones of course.

Diamonds (and high end colored stones) will be worth at least something far after the dollar crumbles. Ask post World War II Europeans. When some of their currencies were worthless, many were able to start new lives with their gems.
 
Neither one will appreciate in value. Sorry! Buying diamonds is not an investment.
 
Just read the whole thread... good points Rich and Denver appraiser. I hope people in the future will see this thread when they consider investing in diamonds. This is a surprisingly common topic in RT.
 
Actually, when looking as diamonds as an investment, as professionals, we regularly get this question from private persons. Like Neil, David, Richard and a lot of other posters already pointed out, it is a bad idea to buy polished diamonds from a retailer, hoping to make profit upon selling it later on privately.

Basically, on the buying side, there is the problem of the cost of distribution. In other words, every consumer is paying that cost, which is mainly consisting of the added-value of the retailer (his operational cost plus profit).

On the selling side, there is the problem of finding a party that wants to buy. If you are not an established retailer, why would someone pay the same price as to an established retailer?

This does not mean that investing in diamonds is a stupid exercise. Basically, we as diamond cutters, are doing this on a daily basis. In stead of physically buying diamonds as an investment, some people might be best of by investing in well-established and efficiently organized diamond companies. While betting on an increase in diamond prices, they can also gain dividends on the daily operations of that company.

Just another way of thinking.

Live long,
 
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