Investors' Corner - Investment and asset protection
What are the advantages of diamonds as an investment?
Hedge against inflation: Like any long-term tangible asset, diamonds also offer a hedge against inflation because they retain their intrinsic value irrespective of currency changes.
Concentration of value: Diamonds concentrate the maximum value in the smallest possible form. This can be strikingly demonstrated in a comparison with gold. While diamonds to the value of 1.5 million euros hve a total weight of between two and 50 grams, the equivalent value of gold weighs around 35 kg. Diamonds are therefore extremely easy to store and transport.
Global acceptance: Unlike other gemstones, diamonds are valued according to a catalogue of internationally applicable criteria. Diamonds are sought after all over the world, and wherever they are the same criteria are used to establish their value.
No registration requirements: One advantage of diamonds in comparison to other investments is that the purchase of diamonds is not subject to national registration requirements, enabling the owner to preserve anonymity more easily. Unlike gold or property, diamonds have never been subject to prohibitions on ownership or special taxes.
Why should I buy diamonds from RenéSim?
Purchasing security: Our good name is our highest obligation. At RenéSim you receive a 30.day right of cancellation in addition to your statutory right of cancellation. Free from limitations – no ifs, no buts; also applicable to individually assembled selections and opened sealed packages and with no upper price limit. Conditions that are very far from being the norm – yet they're all part of ordering from RenéSim.
Attractive prices: We calculate our prices on the basis of current best conditions at global diamond trading centres – not only Antwerp, but also India, the USA or Israel. We are therefore able to find the best-priced diamond for you from the total range of several hundred thousand diamonds on offer all over the world. Our lean company structure and excellent negotiating status as prestigious jewellery produces enables us to offer optimum prices for your diamond purchase.
Consulting and service: RenéSim has achieved a high reputation in the field of diamond trading. Antwerp, Hong Kong, Mumbai, New York or Los Angeles: RenéSim has excellent long-standing contacts to all gemstone centres in the world. Our customer care team is always at your service with expert advice on selecting the right gemstone or collection of stones. We provide support and assistance to you in making your purchase decision and ensure that the diamonds you buy truly match your expectations and purpose.
Internationally valid GIA certificate: All RenéSim investment diamonds are GIA-certified and laser-engraved. GIA, the Gemological Institute of America, is the most prestigious and rigorous independent certification institute for diamonds. While certificates from the HRD (De Hoge Raad voor Diamant), DPL (Diamant Prüflabor) and IGI (International Gemological Institute) also have an excellent reputation, GIA certificates are the only certificates to combine a high international profile with international recognition.
How have diamond prices developed in the past?
Price trends since 1960: The example of a one-carat diamond in brilliant cut of Excellent quality in colour D (finest white +) and clarity IF (internally flawless) shows the strong and relatively consistent increase in diamond prices in US dollars over the period since 1960.
Diamond prices in times of crisis: An examination of diamond prices in the years 2008 and following clearly shows that the overall minor declines in price had already been made up by 2010. For example, prices of one-carat diamonds did not fall at all although their price appreciation stagnated for a short period. It can thus be seen that diamond prices fluctuate far less than the prices of conventional stocks and shares.
What is the value performance forecast for the future?
Increased demand: The AWDC experts predict annual growth of approximately 6%, assuming that demand for diamonds will continue to rise steeply as wealth grows in the extremely populous developing economies of India and China. Demand for diamonds in these countries is forecast to equal that of the USA – previously the largest gemstone market in the world – by 2020.
In addition, diamonds are particularly sought after as an investment in periods of economic instability; this trend boosts demand even in times of economic crisis.
Declining supply: Although demand for diamonds shows continued strong growth, diamond supply is growing by a mere 2.8 % p.a. because many major diamond mines are already depleted and to date no comparable new deposits have been found. Global volumes of mined diamonds have been declining since 2003. While new deposits of diamonds have been found, they are all in inaccessible regions, requiring complex methods such as extremely costly offshore mining on the sea bed.
What are the disadvantages of diamonds as an investment?
Numerous variations in quality: Diamond price trends are closely associated with the quality of the stones; the value of a two-carat diamond in colour G (fine white) and clarity IF (internally flawless) will appreciate differently from that of a two-carat diamond in colour H (white). Private investors may easily be confused by the enormous variety of quality criteria and should always seek the advice of specialists before making their purchase.
Unsuitable for short-term investment seekers: The value of diamonds appreciates slowly over a long period. Diamonds are therefore an unsuitable investment for the purpose of short-term speculation and fast profits; instead, their value develops over the long term or as a result of specific market events. In general, the purchase of diamonds is primarily suitable for the purpose of asset protection, as a hedge against specific crisis situations and/or where extremely long-term investment is the goal.
Small market; structures lack transparency: The diamond market is extremely small, with an annual trading volume of US$ 50 billion. Diamond mining is still in the hands of a small number of global operators. This has the advantage that these mining companies can counteract potential falls in price, e.g. in periods of recession, by artificially limiting supply. On the other hand, these major companies largely control trade routes and end-customers are thus primarily compelled to buy diamonds from classic jewellers at generous mark-ups.
High margins between purchase and sale prices: Unlike gold, buying and selling diamonds requires extensive specialist expertise from dealers; the difference between the purchase price and sale price therefore plays a significant role. The value performance of diamonds as an investment thus depends particularly on where a diamond is bought or sold.
Value added tax: Unlike gold, the purchase of diamonds is not exempt from value added tax. This is particularly important in diamond sales. We will be happy to advise you.
What conditions are needed for a successful diamond purchase?
Clear personal expectations: The decision to purchase a diamond for reasons of asset protection depends on the personal expectations and purposes of the purchaser. If more than one of the following statements apply, investment in diamonds may be the right strategy for you:
- I anticipate further turbulence on international financial markets – perhaps extending as far as hyperinflation and currency reforms.
- I would not exclude the possibility of state sanctions such as prohibition of ownership of gold or aggressive taxation of property.
- I can imagine that significant civil disturbances and upheaval may spread to our regions over the medium to long term.
- I would not exclude the possibility of situations even within our generation where a means of barter apart from gold could be extremely useful.
- I regard diamond purchase primarily as a long-term hedge with the chance of long-term appreciation in value, but not as an option for short-term profits.
- I have a positive emotional connection to diamonds and enjoy owning them.
Purchasing at the optimum purchase: While RenéSim offers diamonds that in many cases are lower in price than the purchase prices of many jewellers, some jewellers and diamond dealers charge mark-ups of 100% and more for the same diamond.
Buying the right diamond: Finally, it is critical that the diamonds chosen are of top quality, and also meet the purchaser's personal goals and expectations.
What must be generally observed when selecting the right diamond?
Rarity and value performance: As a general rule of thumb, the clearer, the whiter and – above all – the larger a diamond is, the rarer it is, and the quicker its price will rise as global supplies of diamonds diminish. Particularly large diamonds of the finest quality already command seven-figure prices today, and an examination of price trends in recent years shows that three-carat diamonds have experienced more dynamic price increases than one-carat stones. A similar development can be seen in a comparison between diamonds of flawless quality and those in lower clarity categories. However, we anticipate that smaller diamonds and diamonds of lower, but still excellent quality will catch up in the next ten years and could therefore be a more interesting choice for investors with extremely long-term perspectives.
Brilliant cut: The brilliant cut is the most common cut for diamonds, and therefore the easiest to sell. In addition, this cut is subject to the strictest criteria, such as definitions of ideal proportions and specific angles, which maximise the sparkle and fire of the stone. Investors should take particular care to choose cuts in categories Very Good and upwards, and preferably Excellent.
High carats: The carat is a measurement of the weight of a diamond, so that the number of carats is always an indication of the size of the diamond. High-carat diamonds have always shown more pronounced appreciation in value. Diamonds under 0.25 carat are not recommended as they are not scarce enough to trigger an appreciation in their value in the foreseeable future. However, smaller diamonds (e.g. quarter-carat) have the advantage that individual stones are lower in value and thus more useful as a means of barter.
GIA Certificate: Certificates and valuations from the Gemological Institute of America (GIA) have the widest international acceptance. For this reason, a certificate from this organisation is a great advantage in later diamond sales.
Other reputable and professional diamond institutes include Hoge Raad Voor Diamant (HRD) and the International Gemological Institute (IGI).
A laser engraving of the certificate number on the girdle of the diamond is a further confidence-building factor. While engraving is not absolutely essential to be able to identify a diamond with certainty, it is occasionally popular with private investors.
High quality: A typical "investment diamond" will be of the best colour D (river / exceptional white +) and the highest clarity categories IF or FL (internally flawless or flawless). The longer-term the investment perspective, the wiser it is to choose diamonds of lower quality or include them in a collection of investment diamonds. In our view the colour and clarity of a stone should always be in categories which are in demand for jewellery, i.e. colour from D (river / exceptional white / finest white +) to H (Wesselton, white) and clarity from IF (internally flawless) to VS (very small inclusions).
The Four Cs – More about Carat, Colour, Clarity and Cut
Carat: A carat is the unit used to measure the weight of a diamond (one carat weighs 0.2 of a gram). Please note that a two-carat diamond does not simply cost twice as much as a one-carat diamond, but actually costs significantly more, because larger stones are far rarer and therefore command higher values (see above).
Colour: As a general principle, the more colourless a diamond is, the higher its value. The scale ranges from D, the highest quality (known as river / exceptional white / finest white +) to Z, the lowest quality with a clearly visible yellow tint.
Diamonds in fancy colours are an exception. In this category, which includes all coloured stones, deep, rich hues are extremely sought-after and increase in value with the saturation (intensity) of the hue. However, in-depth study of the field is essential to ensure that suitable investment choices are made.
Clarity: The clarity of diamonds can be impaired by small inclusions (crystals of other minerals or tiny fractures), which are found in almost all stones. The highest quality category, flawless, is given only to cut diamonds which show no visible inclusions under ten-power magnification. Inclusions in diamonds in the categories VVS (very very small inclusions) and VS (very small inclusions) are invisible to the naked eye.
Cut: Cut is the measure of quality of the cut and polish of a diamond. To achieve the highest classification, the cut must be meticulously executed and the proportions chosen in such a way that the brilliance and fire of the stone is enhanced to the full.
Investment recommendations for diamonds, by investment period and budget
1-3 years, up to 20,000 €: Recommended are internally flawless (IF) one-carat diamonds in colours H (white), G (fine white) and E (finest white).
1-3 years, up to 100,000 €: For this category, internally flawless (IF) three-carat diamonds in colours G (fine white) and H (white), IF two-carat diamonds in colours G and H and IF one-carat diamonds in colours D, E, G and H are recommended.
Min. 5 years, up to 20,000 €: One-carat diamonds in IF quality in colours E, G and H and a one-carat diamond in medium quality, e.g. very small inclusions (VS1) and in colour G.
Min. 5 years, up to100,000 €: Select a stone of over five carats in medium quality, e.g. colour J (slightly tinted white) and clarity SI2 (small inclusions 2), one flawless two- or three-carat diamond (G, H), several flawless one-carat diamonds and a two-carat diamond of medium quality.
How can I sell my diamond at a later stage?
Sale to third parties: In general, a direct sale to a private customer is theoretically the most advantageous method. However, it is also the most time-consuming. Sale on a commission basis via auction houses, agencies or jewellers can be an equally worthwhile method and a faster process.
Sale to RenéSim: We will be happy to submit a repurchase offer for diamonds you have bought from us in the past, or will alternatively refer you to private buyers or recommend suitable auction houses.