Mistakes To Avoid While Purchasing Diamonds
Mistakes To Avoid While Purchasing Diamonds
Mistakes To Avoid While Purchasing Diamonds: Diamonds make a lot of sense as an investment on paper. They have a high intrinsic value, are always in demand, and last forever. Moreover, they are small, lightweight, and simple to stow (unlike that priceless Ming vase you were dying to get at the auction).
And, as with other diamonds and precious metals, their past performance suggests their value will rise over time.
Diamonds, on the other hand, have relatively limited investment potential. One of the primary reasons is that diamonds come in extremely inconvenient packaging.
Diamonds have no uniform price per gramme, unlike gold, which is valued by weight because, let's face it, a block of gold is very much the same as any other block of gold.
Because no two stones are alike, each diamond must be appraised on its own merits, which will be pretty subjective in most circumstances.
This implies picking which diamond to buy can be the most challenging aspect.
Many are investing in diamonds since standard investment options no longer produce the intended outcomes.
Diamond investing appears to be appealing to a diversified portfolio due to low-interest rates and declining markets.
But how do you go about purchasing a diamond as an investment, and how do you know you'll get a fair return?
The fact is that Quality Diamonds would not advise anyone to purchase a diamond as an investment unless they are aware of the dangers and potential hazards.
As a result, we've identified three of the most common mistakes individuals make when buying diamonds.
We're only talking about natural diamonds in this post; if you want to know what we think about investing in lab-grown diamonds, read error number three.
1. Paying an Excessive Amount
The mantra “buy low, sell high” is extremely useful when investing in anything. On the other hand, buying low on diamonds is more complex.
Then there's the tax. You immediately lose 20% of your investment if you do not purchase from a non-VAT territory or through a VAT-registered firm (or the applicable tax rate in your country).
This indicates that the value of your diamond must rise by 20% for you to break even.
Then there's the dealer's markup. This can differ from store to store, so it's vital to shop around to ensure you're getting the most excellent deal.
There are too many reports of satisfied consumers to count that they tried to sell their “investment” diamonds back to the merchant, only to discover that they had been ripped off on the original purchase price.
For this reason, you can get a beautiful diamond at almost wholesale price if you go to a reputable jeweller with small profit margins, like (cough) Quality Diamonds.
Third, there are hidden costs, such as the cost of the setting. While it would be great to keep a bag of loose diamonds in a safe (maybe hidden behind an expensive artwork), most people want to enjoy their diamonds, which means they must be put in a setting.
When it comes time to sell them, though, the setting is likely only worth its scrap value.
And what about coverage? Insurance is a must if your diamond jewellery has any investment value, but remember that you'll have to pay for it again when you sell.
2. Being Overly Optimistic
Investing in diamonds is perhaps the worst way to get rich quickly in the world.
For example, you've never seen Del Boy buy five boxes of jewels to sell at The Nag's Head for a quick profit.
Diamonds take time to appreciate, and many diamond investors are dissatisfied when they do not see immediate returns.
Diamonds are a commodity, and their value, like any commodity, can fluctuate.
If historical performance is any indication, they will rise – but very slowly.
Making a profit in the short term is nearly impossible. So buying a diamond and expecting to sell it for a profit in five years is unrealistic.
So, if you invest in genuine diamonds, your money will be locked up for a long (albeit in a beautiful, dazzling package), so you must be pretty sure that you a) want to invest in that manner and b) can afford it.
If you have to sell your property early to recoup your investment, you will most certainly receive far less than you originally paid (see “Paying Too Much” above).
At the very least, purchase something you adore. That way, you can enjoy it while you have it and not be disappointed if it does not pay off as well as you had planned in the long term.
3. Purchasing the Incorrect Type of Diamond
The final barrier to purchasing a diamond as an investment – which most purchasers fail to overcome – is identifying high-quality diamonds to purchase.
Some diamonds are easier to sell and more likely to get a higher price, so investing in one will make your life easier.
The most critical factor is to purchase certified diamonds. And when we say “certified,” we mean an independent certificate, not one of those highly dubious certificates produced by the store from whom you're purchasing… we still can't believe that's “a thing” (swear word over!).
This is true for many reasons when purchasing a diamond, whether as an investment or an engagement ring.
A certified diamond is significantly easier to resale and more desirable than one that has not been independently tested, especially if it has been certified by one of the most respected labs (GIA and AGS are the best).
Keep the Certificate apart from the Diamond in a Safe Place, Just in Case
The diamond's form can also be important. Because the round brilliant is the most popular diamond form (about three-quarters of all diamonds sold are round), buying in one provides access to a broader resale market.
If you don't want to buy a round diamond, choose another popular shape, such as the princess cut but only buy a round diamond!
Always go for the highest quality, which means a diamond with a good cut and above-average colour and clarity.
But don't allow anyone to convince you that you must purchase the world's finest and largest diamond.
The inverse is true. A diamond of exceptional quality is only of interest to a few customers (those with the fattest wallets and gilded mansions) and is difficult to resale.
Instead, get a high-quality diamond acceptable for the general market; this is more appealing to commercial and private purchasers.
Avoid lab-grown diamonds if possible. They are still incredibly new. Therefore predicting their future is difficult: However, we believe their value will most certainly fall.
This is primarily because they can be manufactured indefinitely, whereas natural diamonds are limited in number. Therefore, their value will likely rise over time.
Finally, go away if someone tries to sell you chocolate, champagne, or cognac diamond. This is marketing speak for “so stained and brown that they're worthless.”
Avoid the Traps
Diamonds may no longer seem like a good investment to you. – and you'd be correct if you're looking to acquire diamonds simply for investment purposes.
Almost anything else would be a better investment (Panda videos on YouTube are a good choice).
However, if you want a lovely piece of jewellery with diamonds AND want to buy something that will improve in value over time, then buy diamonds.
Just remember to follow the diamond rules (they sparkle considerably more than gold ones):
Purchase at the lowest possible price, excluding sales tax if possible.
Purchase a certified diamond of exceptional quality in a popular shape.
Consider when and how you want to sell it.
Purchase something you adore.