If, ten years ago, you bought a well-cut 4.00 carat F Color, VVS2 Clarity round brilliant cut diamond, the wholesale list price of your diamond has gone up 170%.
If you bought that diamond from me, and you want to sell it, call me: we’ll both make money.
Choosing the best diamond is like selecting real estate…if you’re in a good neighborhood (on the Rapaport Price Sheet) you’ll do okay. If you bought an “over-improved” property, say a nicely cut G Color, Flawless .38 carat round brilliant diamond, over that same ten year period, you lost 22% of your money.
I’ve been a jeweler for over twenty years, and I have the courage to tell most of my clients that many diamonds are a lousy investment. When purchased wisely, a diamond can be a solid cash asset. What does that mean? After a decade of enjoying it, you should be close to breaking even.
Which diamonds are BAD PURCHASES? What’s a good CASH ASSET DIAMOND? And what variables turn a tiny piece of compressed carbon into a CASH COW? I’m going to give you step-by-step instructions for each of these categories.
First, take a cursory look at this chart, and page down. You can spend more time playing with numbers later.
Rapaport “Ten Year Price Performance” Chart
Diamonds may be very pretty, and they might make her heart go pitter-patter. But if you are an accountant or a budding venture capital gal, there are reasons to avoid a bad day at Black Rock.
Even though they might be pretty, Small rocks are bad rocks. No one cares if you have a certified, colorless, flawless .18 carat diamond. Or a .35 carat. It hurts to say this, but a fine .80 pointer is just no great shakes. You are better off, if you have a limited budget, to go for something you can see without squinting, and not worry that you won’t get your $500 to $2500 back. In the jewelry biz, remember: the lower the price, the higher the profit margin.
Retail rocks. If you are working with a budget under $3000, for goodness sake, look for someone like me. Small diamonds have very high markups at retail, and since their re-sale value is so low, dealers like me tend to have more than our share of .40 pointers that we’d like to sell at a fraction of retail. They may not make you money, but you won’t be out $2500 for a forty pointer.
Rocks with “iffy” certificates. I don’t want people to sue me, so I won’t list them here. Let’s just say that, despite real issues, G.I.A. certificates are still the standard of the gem trade. EGL USA certs are reliable, though less stringent than G.I.A. Remember that EGL is a franchise, and the offshore EGL certificates don’t carry the cache of domestic EGLs. (I’m being nice; I didn’t even mention IGI).
ANY DIAMOND that requires a payment plan.
Diamonds that are already set--especially those diamonds that are set in fancy settings with lots of whoop-de-dos, halos, etc. Settings can distract you from the quality of the center diamond. Don’t fall in love with the chassis and wind up with a diamond that goes “putt-putt.”
Special deals “just for you.” Don’t fall for a lousy certificate, a bad cut, or some fast-talking jeweler. I lost a sale to an old high school classmate of mine when he was on vacation in a warm climate. “The jeweler liked us so much,” he gushed, “he sold it to us at 25% of the price on the tag. He told us he lost money on the sale!”
Uh huh, sure he did.
If you are dealing with a legitimate dealer, he or she can liquidate items INSTANTLY, for cash, at below wholesale values. Why would a stranger give you a ‘special deal’? I do give my local clients extra consideration out of loyalty, and because they are my only advertising… but I don’t lose money on a sale.
CASH ASSET DIAMONDS
Chances are, if you are still reading this post, this is your neighborhood. High five!!!
A diamond that’s a cash asset is:
____ AT LEAST ONE CARAT in weight. (The bigger the better…look at the chart).
____IS NICELY CUT.
____is TOTALLY EYE CLEAN.
____FACES white (unless it’s certified ‘Fancy’)
____is CERTIFIED by a legitimate company OR has been honestly assessed by your jeweler. “Look, I know this says F/VS1 EGL, but in my opinion, it’s an H, SI1.
____Is priced within reason of the Rapaport Price List (published weekly). A huge discount might mean you are looking at an estate diamond (used) or that the diamond is not of the standard reflected by “Rap.”
____is probably a round brilliant. Rounds appreciate faster and are less likely to be damaged by everyday wear.
DO NOT EXPECT TO MAKE MONEY on a cash asset diamond. DO NOT EXPECT TO BREAK EVEN for five, ten, or even fifteen years! But as you carefully wear and totally enjoy your diamond, you should feel confident that in a couple of decades, when that snowmobile you just bought for $8,000 is no more than scrap metal over at the Filipowitz Brothers Metal Yard, that this diamond is just starting to hit its stride.
If your budget is between $6,000 and $12,000, please don’t settle for a bad rock. You deserve a cash asset.
HOW TO BUY A DIAMOND THAT SAYS “MOO.”
1.Set aside some real money. $25K is a nice start. $50K is better. $100K, as long as it does not exceed 5% of your net worth will give you a private, portable asset that should make you, your Sweetheart (and your heirs) happy.
2. Interview a jeweler before you look for a diamond. Talk to more than one. Be sure your jeweler of choice is globally connected, credentialed, experienced, and… here’s the kicker…tell him or her you want to see the invoice(s) on your purchases. Negotiate a fair percentage of profit for this professional, based in part on the complexity and availability of the gemstone portfolio that works best for you. (Keep in mind that shipping/courier charges can be substantial). If you elect to have me (or someone like me) represent you at an auction, be prepared for a tutorial and a dose of patience.
3. When the jeweler points her index finger and says,”Get out of my studio”, offer to wire funds IN ADVANCE, if they will agree to a contract.
4. Decide TOGETHER whether you are looking at one rock, several diamonds, or a selection of natural fancy color. Discuss whether you’ll want wearable diamonds or something that’s best kept in a vault. Agree that the balance of your contract will be refunded or conveyed in precious metals, at a standard profit margin of 3%.
If you have chosen your expert jeweler wisely, you will save money with this strategy. Most jewelers don’t keep $200,000 diamonds in the showcases: it’s just too much of a liability; it’s smarter, instead of having a jeweler ship in diamonds “on memo”, to commit to a diamond investment with a seasoned professional who is capable of negotiating a cash deal. Everyone will cut their profit margin on a sure thing–of course, confirmation of the certificate and, in the case of Fancy Color,personal inspection are critical, along with a Rapaport and auction search (like real estate comparables).
5. In your contract, specify a completion date for your transaction. Give your broker time to find a great deal but don’t let her play the float with your funds.
6. Be prepared to hold your sparkling investment for at least 3-5 years to a decade. (Now you can look at the price performance chart, above).
Asas soon as Martin Rapaport complains that I published his chart “intended solely for the (diamond) trade”, I might have to take it off the Internet. If you email me, I’ll email you a scanned copy for your records. I also have price performance charts for 1 year, 5 years, 20 years, etc…as well as price performance data on various color/clarity/carat weight combinations.
Call me about converting your wheat crop into a cash cow, and I’ll share all my data (including my invoices) with you. 406-453-7300.