Have you ever thought what Value Investing means? And how could you translate that into Diamonds and Gemstones?
Value investing is owning something that generates or hold value. For e.g. you could own shares in power, mining, and in water companies. From coal, water, wind, sun, nuclear,... they will generate power that you will use in your home, whilst the mining company will extract the copper that will be used to create a wire, that will transmit the very same energy. And the water company will treat the water that reaches your home.
From the moment you wake up, turn the light, brush your teeth, you are paying for that water and electricity. And the cycle goes on. Those companies generates value for your daily life from water, wind, etc... and you pay for them. As a shareholder you would also earn from that.
Like every investment, you will have good and bad companies in this sector, and you will need to carefully select the good ones.
And how can we translate that to Diamonds and Gemstones.
Why certain diamonds and gemstones hold value and are considered an investment?
Why certain stones are sold for a small fortune in public auctions?
It is all about rarity, durability, and scarcity.
Look at this Natural Green Diamond.
Its size?
6mm, like a tic tac.
Durability?
It will outlive you. We have diamonds in our stock from the 1700s and they are as good as new.
How it holds value?
Diamond has a finite supply and for every 200 tons of extracted ore you have 1ct of gem quality diamond (0.2g = 1ct). That is only 0.000001%.
From that, only one in 10000 diamonds will be Fancy Color, mostly Brownish or Yellow, with Green, Pink, Blue, and Red being even rarer.
What about this Vivid Blue Tanzanite?
Considered rarer than a Diamond and extracted in only one mining location in the world, their supply is almost depleted. This means that in the future the only existing Tanzanite's will be those previously mined.
Are all diamonds and gemstones investment grade?
No. Although their supply is finite, smaller stones are widely available and easier to produce, as most of the rough extracted will suit this purpose. This makes them more prone to price fluctuations and oversupply. Nevertheless, compared to synthetics, they will hold a certain value.
It is important to notice that those that are considered investments, their purpose it to appreciate in value with time. Unlike certain stocks, for e.g., they will not pay you any dividends or profits.
Do you believe a lab grown, synthetic, or imitation is a valid replacement to the real one?
They are not. Like printing money, they can be mass produced and rendered worthless. Some jewelers will offer it for you for free, if you make a jewelry with them. And although they might be sold to you as an equal replacement, green alternative, etc... it is a misleading affirmation in many cases. They consume vast amounts of energy and are easily identifiable by specialty equipment, man of which are portable, cheap, and can be operated by anyone.
Disclaimer: This post reflects our opinion and is not an investment recommendation.
All investments are prone to risk, and if you want to invest in Diamonds and Gemstones further study and research is required.
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