Fancy Colored Diamond Investments: An in Depth Analysis
In 2008, the world saw what was according to the IMF, “the worst financial crisis since the great depression”: the U.S debt crisis, the Euro Crisis, and a gloomy political environment in the middle east.
Throughout the fall of 2008, as major financial markets lost more than 30% of their value, investors sought to protect their wealth by diversifying and hedging their portfolios. Savvy investors, particularly HNWIs, swiftly moved their assets from traditional stocks and bonds to alternative investments.
In particular, they sought out tangible assets with an actual, insurable, value that would remain resilient to market fluctuations. And for these savvy investors, no category of tangible assets proved as secure, attractive, and lucrative as fancy colored diamonds.
Recession proof and consistently valuable
In a time of recession and extreme market turbulence, the move to fancy colored diamonds was not surprising, as fancy colored diamonds as an asset class have consistently proven themselves to be recession proof. Despite global and national recessions, political turmoil or stock market suffering, colored diamond prices have experienced no significant drops in the last 40 years.
The reason for this is simple: a key factor that underlies market instability and volatility is the existence of the market speculation that is made possible by a line of credit. Essentially, it is the ability to control stocks or gold valued at $100 backed against an actual payment of only $10. With colored diamonds, there is no credit associated with the purchase.
The valuation of a diamond is not based on market behaviors or fluctuations, which are often arbitrary and greatly sensitive to investor and economic sentiment. Instead, it is the intrinsic value and rarity of FCDs that keeps their value highly appreciated
As natural colored diamonds are not subject to the same market forces as traditional investments, they have a significantly lower volatility than other assets including gold, the prices of which fell significantly due to political turmoil in the Middle East.
In addition, fancy colored diamonds do not adversely affect traditional investments such as stocks and bonds, and can be easily maintained as part of an overall, more diversified portfolio.
Experience and insure your investment
A natural colored diamond is completely unlike a traditional asset in an extremely fundamental way: it is a tangible, and in no way theoretical. Unlike any traditional asset, be it company shares, government bonds, funds, the stock market, a colored diamond can be seen, touched, physically evaluated, possessed, and experienced
There is also another key reason that savvy investors choose fancy colored diamonds over other tangible assets: in addition to their tangibility, unlike other collectables, rare colored diamonds are a multipurpose asset.This means that unlike fine wine or vintage cars, precious colored diamond jewelry can be used and enjoyed without any depreciation to the asset itself.
In fact, the longer a colored diamond sits in your possession, the more it will increase in value. Additionally, a diamond can be insured, which is highly reassuring for investors who seek security in turbulent markets.
The rosy future for colored diamond investments
The future of fancy colored diamonds undoubtedly looks rosy.
In the last ten years, colored diamond prices have risen 122% in the last ten years, with pink diamonds leading with 180% growth over the same period, proving that for investors with a low risk, long term perspective, fancy colored diamonds offers some of the highest and most secured returns amongst all asset classes.
In the future, the trend for rising colored diamond prices is expected to continue, compounded by the fact that supply of this rare, non-renewable natural resource is expected to dwindle significantly over the next 20 years.
The production of loose colored diamonds relies heavily on existing deposits, and today, many major diamond mines have exhausted their open-pit production, and experts estimate world diamond production will drop significantly within the next two decades.
This means unless a large number of new mine is discovered in the near future, that supply will become even more limited, and fancy colored diamonds for sale will become even rare - and expensive - than they are today.
To learn more about investing in fancy colored diamonds, speak to our dedicated diamond experts for comprehensive pre and post investment services.