Investment stones

[whitewave]

Also, I wonder if mined diamonds might become the new furs sometime in the future, in other words, largely shunned.

I forgot how many tons of earth have to be dug up for each carat of mined diamond but the lab diamond ads are hitting hard with lab diamonds being the ethical, responsible, conflict-free choice and they're becoming very popular, so who knows.

Diamonds are not a need and don't really serve any purpose other than the luxury definition we give to them so I think that's always something subject to change.

The lab diamonds I have are impressive, and sure to get better over time. I also wonder if mined diamonds will become like fur.

 

[whitewave]

How will this potential buyer pay you? Oh wait, you have to place it on consignment for 20% of the sale? And oh wait, now you have to pay taxes on income? And the diamond was double taxed because you paid sales tax on it on the front end?
hummm….

 

[foamblue]

Sorry, maybe I misunderstood what you have wrote but I am not looking at the Rap prices as my profit baseline, I am just comparing the difference between what those diamonds were worth in 2004-2014. If Rap claimed that a certain spec of diamonds were worth $50k at retail in 2004 then they were worth $100k at retail in 2014, then I am looking at the 100% price increase. I am not trying to buy diamonds at wholesale price then try to sell them off at Rap's suggested retail figures.

I was just comparing the difference between 2004-2014 and seeing if that was a reliable source to compare the growth in diamond prices.

 

[denverappraiser]

Every stone on this list has the same price on Rap (adjusted for weight differences)

Diamond Search Results | Real-time Information on 1,000,000+ Diamonds | PriceScope

PriceScope's Diamond Search is the best place to find the best diamond prices. Search and compare over a million natural, lab and fancy color diamonds.

www.pricescope.com

 

[Diamond_Enthusiast]

Agree with the above comments about your likely inability to liquid at a reasonable price that you'll be happy with - as a private seller, you don't have the distribution channels, track record, upgrade policies in place. Potential buyers would be inclined to use reputable, establish sellers and one that they can reach if something goes wrong.

To compensate them for taking the risk to buy from you, implies that you need to entice them to buy from you - by offering a much lower price or if the diamond you are selling is truly a rare gem.

Scenario 1 - take a big hit on price. Not a rationale for investing to be begin with. Even if diamond prices does increase sharply, the fact that you going to take a hit on price erodes your profit by ??? an unknown amount (there are many variables that you can't predict right now). For investment purposes, there are so many better asset categories if it is about returns.

Scenario 2 - you have a truly rare gem. As mentioned before, this is unlikely because 2ct D IF diamonds are available and to get a good face up spread, you can cut it shallow as mentioned by other posters. There is only so much you can do before impacting performance of the diamond. Nobody wants a big dull stone.

 

[yssie]

I was just comparing the difference between 2004-2014 and seeing if that was a reliable source to compare the growth in diamond prices.

The 2004-2020 years have seen - in no particular order, just off the top of my head here -
- Development of modern light reflector technologies to analyze optical excellence
- Creation of the “super ideal” round brilliant
- Worldwide adoption of the Kimberley Process
- Canada mines becoming operational
- Argyle’s most productive years, in terms of both quantity and quality of output
- Consumer education becoming widespread
- Buying diamonds on the internet becoming normalized

In contrast, 2021 and beyond we’re looking at
- Surat becoming a global cutting and polishing powerhouse (labour cheaper than cheap)
- MMDs gaining acceptance and even preference
- Loopholes in KPCS becoming public knowledge and tainting the allure of “‘mined”
- …

Could the comparison you’re looking at hold true for the next decade? Sure. But it could also not. I have no idea.

 

[Diamond_Enthusiast]

The 2004-2020 years have seen - in no particular order, just off the top of my head here -
- Development of modern light reflector technologies to analyze optical excellence
- Creation of the “super ideal” round brilliant
- Worldwide adoption of the Kimberley Process
- Canada mines becoming operational
- Argyle’s most productive years, in terms of both quantity and quality of output
- Consumer education becoming widespread
- Buying diamonds on the internet becoming normalized

In contrast, 2021 and beyond we’re looking at
- Surat becoming a global cutting and polishing powerhouse (labour cheaper than cheap)
- MMDs gaining acceptance and even preference
- Loopholes in KPCS becoming public knowledge and tainting the allure of “‘mined”
- …

Could the comparison you’re looking at hold true for the next decade? Sure. But it could also not. I have no idea.

All these things mentioned above could drive structural changes in the industry that you don't know the impact of. Which this why I said there are so many unknown variables that can affect diamond prices (systematic risk) and your eventual sale price (systematic risk + risk specific to you).

In finance, we say that past performance is not necessarily indicative of future performance. So there is no point of looking at the rap to predict diamond prices in the future.

 

[whitewave]

All these things mentioned above could drive structural changes in the industry that you don't know the impact of. Which this why I said there are so many unknown variables that can affect diamond prices (systematic risk) and your eventual sale price (systematic risk + risk specific to you).

In finance, we say that past performance is not necessarily indicative of future performance. So there is no point of looking at the rap to predict diamond prices in the future.

We say that in terms of the rhythm method of birth control lol. The past doesn’t mean the future

 

[denverappraiser]

Let’s talk briefly about truly rare gems. The ones with 6- and 7-digit price tags. Who buys those? Where and how do they sell them?

It’s complicated but look at Sotheby’s, the big auction house. They sell quite a bit of this sort of thing. Mostly they charge buyers 25% of the hammer price and sellers 10% plus an assortment of fees for photography, insurance, shipping, etc. That’s 35% off the top both when you buy and when you sell. In the financial world, that’s HUGE. I’m not slamming Sotheby, they’re a good company and they’ve got a lot of competitors that charge roughly the same. They earn their money.

Buy a hypothetical diamond for $100k. That’ll cost you $110k and the seller will get $75k of it, minus another grand or so in fees. Wait 10 years and sell it for $200k. 100% gain, baby! The buyer will pay $220k and you’ll see $150k of it (minus that grand in fees). That’s $39k on $110k invested. 35% over 10 years, and that’s if everything goes well. 3.1%/year compounded if Rap is right. Minus taxes, of course.

I’m unimpressed.

Can you do better? Maybe. Some people do. There are pros watching this like a hawk and they are totally waiting to dive in if there’s money on the table. The big auction houses also have competitors who work for tighter margins. A lot of investors don’t want to go through the brain damage and the risk of consigning, most dealers don’t want to spend that kind of money to take something into inventory, and most consumers don’t understand the variables. It’s not all on the cert as anyone here will be happy to tell you.

 

[MissGotRocks]

Listen to your financial planner. They would NEVER advise you to diversify funds in diamonds. Pie in the sky returns would be just that - pie in the sky. Save yourself loss of money and heartache - speak to your financial adviser!

 

[Diamond_Enthusiast]

Buy a hypothetical diamond for $100k. That’ll cost you $110k and the seller will get $75k of it, minus another grand or so in fees. Wait 10 years and sell it for $200k. 100% gain, baby! The buyer will pay $220k and you’ll see $150k of it (minus that grand in fees). That’s $39k on $110k invested. 35% over 10 years, and that’s if everything goes well. 3.1%/year compounded if Rap is right. Minus taxes, of course.

On top of this, we haven't even accounted for the opportunity cost of locking this $100k away in that diamond instead of investing in assets with better returns + further forgone income from the compounding of the difference in returns!

 

[mommylawyer]

On top of this, we haven't even accounted for the opportunity cost of locking this $100k away in that diamond instead of investing in assets with better returns + further forgone income from the compounding of the difference in returns!

Don't forget the cost of insurance for your $100k diamond over the next ten years.

 

[Rockdiamond]

For me- all due respect @foamblue - this discussion is far more important as yet another warning thread to all of our readers that sellers who are using "investment" as a selling point of diamonds are either purposefully untruthful or horribly uninformed. Neither of which seems a good trait in someone you'd be trusting to purchase something so costly....

@foamblue ...just to continue the discussion on your behalf......there's currently about 82000 diamonds for sale at rap- all at wholesale.....they should all sell immediately, right? ( you get my point...simply owning something which can be sold at a true wholesale price is a guarantee of...nothing...)

 

[denverappraiser]

On the bright side, you or your beloved do get to wear it. $100k+ can get you some nice bling. There are definitely worse ways to spend your money. I think diamonds are super cool little things but don't go into a diamond deal expecting to ever make money out of it. Count it as happy luck if it turns out that way.

 

[foamblue]

Thank you, I have read all of the messages and your auction fees breakdown of a hypothetical $100k stone definitely opened my eyes.

 

[Wink]

I have truly enjoyed reading this thread. You have received a great deal of excellent advice. I am going to add my two cents.

It will all be purchased at wholesale/trade prices so there will be no retail mark up,

This always gets me. Who says it is wholesale, and who even thinks that wholesale means no markup? If I sell to a jeweler or a wholesaler, that is by definition a wholesale sale, and I am going to have a markup in it or I will stay home that day and sleep in. If I sell to the public, that is by definition a retail sale, even if I sell it for the same price I would sell to a jeweler or a wholesaler. I am going to have a markup in it or I will stay home that day and sleep in.

Oops, forgot this 10carat one

This made me remember reading a comment from Melanie Griffith many years ago. She was talking with or about a friend and commented that they both had the number for their favorite ten carat diamond dealer memorized.

My wife and I both had a great chuckle over her comment and I have never forgotten it.

Wink

 

[John Pollard]

I am looking to diversify my portfolio and I am thinking of getting some investment diamonds which we will keep for 5-10 years.

The others have given solid insight into commercially traded diamonds.

In terms of an actual, traded commodity, are you aware of the Diamond Standard Coin? It might be interesting if you play the market/s.

The $25M IPO happened in March @ $5,000 pu. They announced five more tranches of $10M each in August. Series one opened at $5,750 pu - looks like $5,860 as of today. Initial returns tracked here.

Coverage on Bloomberg.

Disclaimer - I do not currently sell, own or endorse this commodity. I blogged about it in August and have been following. It's still in development to list on NYSE, subject to SEC approval.

 

[AprilBaby]

I had better return on the last 10 years on my apple stock than you would get on your diamonds.

 

[Alybird]

Diamonds are not an investment.

They're not even that rare. The market is literally saturated with them. And in the carat/clarity/color range you're looking at, these are more common than you think. On any given day in OC, I probably see about a handful of women walking around with 3+ ct stones. Even at this size, your average consumer does not care about color/clarity to an exacting degree. And diamond connoisseurs are about the cut above all, so your buyer base will be narrowed tremendously considering that there is intense competition in the diamond market.

I was told by my jeweler that the American market buys stones mostly in the G/VS range.

A 2+ ct D/IF stone is a nifty thing and most people would agree to that. However, the people I know in my life who would be able to comfortably afford this quality of diamond would walk away, in preference for leaving those funds under the watchful eye and expertise of their financial advisor.

 

[Dancing Fire]

There is no such thing as investment diamonds (maybe except museum quality stuff that normal humans can't afford). There are a million better ways to invest your money.

Or lose your money!...

 

[foamblue]

Thank you for all of your advice guys, I do appreciate it and I will not be investing in any stones. Besides the stock market, does anybody have any suggestions of physical, compact investments that we could do besides gold bars? Gold bars are great, however I am also looking to diversify the funds and small, compact things like that would be ideal.

 

[kb1gra]

I'm not clear who is advising you to diversify into compact physical goods unless you are looking to smuggle something or evade taxes. Physical items come with either secure storage cost or a risk of theft and destruction.

You can diversify by buying index funds, bonds, international stocks, real estate, vacant land, cryptocurrency...

Historically, Hermes Birkin bags have done well for me, but of course, you have to be able to find one at retail, and if you're not already a buyer of them, now is not the time to start.

Of course, none of this is investment advice. Two of the items in the above list have made me a millionaire. I'll leave it to you to guess which ones.

 

[MRBXXXFVVS1]

As others have said, diamonds are illiquid in the used consumer market. Expect a -50% ROI. Rare, "investment" grade diamonds are in the millions, still fairly illiquid, have high insurance holding costs, and there will be substantial commissions when reselling.

I am not an investment professional, so please consult a reputable, licensed financial advisor (maybe start with a major bank/institution) and take at your own risk...

Assuming maxed out emergency savings, 401K, HSA, primary residence, IRA, 529 (if applicable), no debt (except interest rates <3% on real estate), and substantial brokerage account balances invested in the stock market, that is where I would start (roughly in that order). "Average in" (continuously invest overtime to mitigate market fluctuations, at the expense of compounding during the time) the stock market (search "lazy" investor for ideas on ETFs and index funds). Real estate investments, followed by accredited investment opportunities (venture capital, private equity, hedge funds, etc.) if you have considerable assets, but you'll need to fully run the numbers and understand they carry higher risks.

I'm debating on investing in more real estate, but the market is very high (cash flow isn't there) and it requires some level of commitment/effort that I'm not willing to prioritize at the moment. I'm thinking of just putting more money in S&P 500 index funds since they are well diversified and take pretty much zero effort. I'm also OK with more cash (money market) and waiting for a buying opportunity.

 

[MollyMalone]

Don't forget the cost of insurance for your $100k diamond over the next ten years.

I'm not confident that we consumers can even obtain such insurance. Last I heard, Jewelers Mutual's typical, loose stone coverage was for just 30 days after purchase, as it's intended to cover loss-damage to the stone while it's being set.

4 years ago, someone in Oklahoma came to PS because of her concern for her neighbors, who had succumbed to the "investment" pitches of an outfit in Canada and paid half-a-million dollars for colored diamonds. The investment company had just told the couple that they had lined up a buyer in China, but the couple would have to wire $72,000 to cover the cost of insuring the diamonds in transit. You'll see in her post #45 in this thread that she had some of her posts deleted from the thread out of privacy-security concerns, but IIRC one of the deleted posts explained that the couple had spent additional money to have the diamonds set into jewelry because they could not obtain insurance for the loose stones.

Elderly neighbors in colored diamond scam???

I don't know diamonds and I'm a natural skeptic. So I'm looking for insight. I found out my elderly neighbors purchased color diamonds a few years ago. It's been an ongoing investment for the last 3 years. They've spent a half million in loose colored diamonds. They have GIA reports for them...

www.pricescope.com

 

[rockysalamander]

I'm not confident that we consumers can even obtain such insurance. Last I heard, Jewelers Mutual's typical, loose stone coverage was for just 30 days after purchase, as it's intended to cover loss-damage to the stone while it's being set.

4 years ago, someone in Oklahoma came to PS because of her concern for her neighbors, who had succumbed to the "investment" pitches of an outfit in Canada and paid half-a-million dollars for colored diamonds. The investment company had just told the couple that they had lined up a buyer in China, but the couple would have to wire $72,000 to cover the cost of insuring the diamonds in transit. You'll see in her post #45 in this thread that she had some of her posts deleted from the thread out of privacy-security concerns, but IIRC one of the deleted posts explained that the couple had spent additional money to have the diamonds set into jewelry because they could not obtain insurance for the loose stones.

Elderly neighbors in colored diamond scam???

I don't know diamonds and I'm a natural skeptic. So I'm looking for insight. I found out my elderly neighbors purchased color diamonds a few years ago. It's been an ongoing investment for the last 3 years. They've spent a half million in loose colored diamonds. They have GIA reports for them...

www.pricescope.com

I was thinking of that poor couple as this was being discussed. Did we ever hear if they were ok, in the end?

 

[caolsen]

What do you guys think of this 10 year Rapaport report? It seems like the 3ct+ diamonds had great returns.

https://www.diamant-gems.com/wp-content/uploads/2017/02/rapaport-prix-diamant-10-ans.pdf

The Rap prices give you no insight into the difficulty, time and commission costs to sell a diamond as a private seller. And the point made earlier here about lab diamonds and changing attitudes toward the environment side/damage with mining is a great one if you’re enbracing diamonds as an investmen, risky as hell, btw. Who knows what the diamond market could look like when you want to sell - attitudes change. Case in point, the luxury fur market has collapsed. I have an inherited very high end, rare fur that I could not give away today.

 

[heididdl]

I am looking to diversify my portfolio and I am thinking of getting some investment diamonds which we will keep for 5-10 years. The original plan was to get 3 fancy intense/vivid pink or blue stones, as those colours constantly seem to be increasing. The sizes will approximately be 0.50ct-0.70ct. However, I think it may be better to only get 2 fancy pink/blue stone then purchasing another 1-2 white stones for better liquidity instead of a 3rd pink.

It will all be purchased at wholesale/trade prices so there will be no retail mark up, however I was just wondering what people's advice would be? I appreciate that it will take long to sell the 2 fancy color stones however that is why I am trying to diversify it by investing in 1-2 white colour stones so if I ever need the funds, then it should be easier to liquidate the 3 white stones.

Also, can I ask which white stones tend to give the best returns? I am thinking of looking at 2ct Internally Flawless/VVS1 stones, as I am thinking of getting anything which is more premium/rare as opposed to 1ct VVS's or VS's which are abundant.

I have been told and from past experience. Diamonds are not the best investments . I have gone to sell several very nice stones and having to take major loss.

 

[MollyMalone]

I was thinking of that poor couple as this was being discussed. Did we ever hear if they were ok, in the end?

No, the OP's post #45 in that thread is the last time she posted here on PS. I'd like to think "no news is good news," but sadly, I imagine this story did not prove to have a happier ending than what we were left with.

 

[Mrsz1ppy]

I have made money on diamonds, but it is always due to a mistake on the vendor’s part. You make your money when you buy. Know your market and know when something is mis priced.
Those are rare opportunities. They happen for me at pawn shops, antique auctions where jewelry is not the main draw, and the RealReal. Also, at estate jewelers.