In India ... size matters.
Blame it on the size, but Indians are now looking at high-end bigger diamonds as a good investment. The trend is definitely picking up and focus on the stone seems to be at an all time high. But, the final decision to put their monies in investment, depends on the size. And of course the Cut, the Color, the Certificate, the Confidence and reliability of the Company, and the whole paraphernalia! Slowly, diamond is also becoming an investment vehicle aka Gold for the Indian consumer, thanks to the popularity of diamond jewellery. Investors seeking protection from inflation with growth opportunities frequently turn to precious metals and other alternative investments as a relatively safe yet lucrative addition to their investment portfolio. Because gold and silver have been dominating the markets, more investors are considering purchasing diamonds, to counteract impending inflation.
Looking back, one could see that the Indian populace would invest in gold and real estate only, period. Nothing else was good enough or safe for them; and these two remained the most preferred investment vehicles in India. Even today they reign supreme, with the diamond butting in, playing the proverbial camel. In India at least, Gold will never become passé. Traditionally, gold and gold jewellery has offered high returns on investment, which holds true even today. The yellow metal has always topped the list of possible investment choices of investors. But of late, the trend seems to be shifting towards diamonds quite a bit. Small investors in India seem to have started looking at diamonds as a great inflation hedge investment, if the demand for diamond jewellery in recent times is any indication.
And, in earlier days, numerous myths came into play while diamonds were bought in India. Customers were hesitant to go in for purchase of diamonds/diamond studded jewellery for the simple reason that they lacked knowledge of the stone. Superstitions too clouded the buyers decisions as they believed that only flawless diamonds were safe to buy, whereas diamonds with inclusions brought bad luck to not only the user but to the whole family. And also, one would wonder if the stone was real or artificial as there were no parameters / supporting documents or methods to convince the buyers of the true value of the stone. Besides, because of the high prices, diamonds were considered luxury items. It is to be remembered that those were the days when small, cheap diamonds were not heard of and if you bought diamonds, it was always the bigger stones and preferably flawless. Most of the time, the astrologers were consulted to ensure that the said diamonds were compatible to the user and that there were no astrological major issues. So, it was not surprising that buyers were allowed to keep the stones in their homes for a few days before deciding to make the actual purchase. In those days, spending on diamonds was considered more of a liability rather than an investment or an asset. And as a luxury item, the chances of it being stolen were considerably high.
However, over the years, Indians have come to accept diamonds, as they do of gold, through changes in the overall diamond industry growth, popularity of diamonds and knowledge acquired through media etc. And slowly but surely consumer confidence on the stone increased. As of now, diamond and diamond jewellery have found their rightful place in the market. Diamond studded jewellery had never had it so good in the past as India’s love and belief on gold was unshakable. Gold still holds forte, but diamonds are also considered as good for investment as the consumers’ get more educated about diamonds. More importantly, it is the diamond jewellery companies who have strived to promote diamonds and diamond studded jewellery in to the market with their promotional initiatives. The Gem & Jewellery Export Promotion Council of India has done its bit too. Also, the companies themselves have taken all steps to offer schemes which offer buy-back, discounts and other attractive offers, thus promoting a sense of confidence among the customers on the companies and retailers.
Investor’s to take note of a few points while investing in or purchasing diamonds
a) As investors you should consider your risk tolerance, investment capital and time horizon when deciding on an appropriate investment vehicle for investing in the diamond market.
You will require substantial up-front capital while buying physical diamonds in a raw or cut and polished state. Also obtain an insurance policy which will cover the stones in the event of theft or damage. And when you are purchasing physical diamond stones, consider it a long term investment. Because, unlike gold, diamonds would be difficult to sell and chances are you will lose substantial commissions and also face other expenses. If not interested in physical stones, you can invest in a mutual fund or exchange traded fund which either invests directly into the diamond market or invests in diamond mining companies. Here you will require far less investment capital. However, investments into diamond mutual funds or stock of an individual diamond mining company will tend to have wider fluctuations than the actual market price of diamonds. You should be comfortable with short-term fluctuations in investment value
b) Before you commit to purchase physical stones, find out the grade, carat weight, and proper identification the stones. Approach a certified jewellery dealer and get documentation of diamond grade --- that is about cut and clarity as well as of any inclusions or imperfections in each stone. The Gemological Institute of America’s grading certificate or any good laboratory would suffice. Yes, it is a minefield ...making sure you have proper verification, authenticity. And you have also got to know your cuts too, if you are buying cut stones. It helps.
c) You should consider the long-term performance of the diamond market rather than the daily fluctuations of diamond prices, whether you are investing in physical diamond stones or in a diamond mutual fund or exchange traded fund. Daily price of diamonds may be volatile, but the long-term performance of the diamond market is normally steady and positive. Also, make sure to buy your stones as far up the value chain as possible ... for instance, buy from a well-known and established manufacturer. And make sure to check on an online portal for current market prices. And after you invest in diamonds, don’t keep them in a Bank vault. Wear your investment and be happy. Also, diamonds don't break nor do they go out of fashion. In addition, diamonds represent immense value.... all qualities that long-term investors look for.
As of now, interest in diamonds as a physical investment has begun to open, mainly due to the gold prices going haywire. In India, with demand increasing by the year and unsure rough supply situation looming before us, one can see diamond demand increase and diamond as an ‘investment vehicle’ picking up. Western wedding traditions have invaded Asia and prospective brides in India and China are now also receiving diamond rings in such quantities that demand is surging, and prices seem to be going north. With demand on the rise in India, diamonds are becoming an alternative investment category for individual investors. Is this a trend where diamonds are soon to become investor’s best friends in India?
Buying the right diamond is of utmost importance
Now, you want to invest in physical diamonds but are you looking at the right types of diamonds are the major question. While colourless stones still the best, the coloured diamonds are also where investment potential lies. With regards to colourless, diamonds that are magnificently large with a perfect colour, cut, clarity can act well as an investment. Simply because smaller stones with an excellent quality are actually quite easy to find. You just a have to look around to what is available in the market. But the natural coloured diamonds, are still considered rare.
Meanwhile, a fancy coloured diamond is a rare investment vehicle that will always remain a safe haven during difficult times. It will substantially increase in value over time. However, it is important to be aware of industry standards and to deal with reputable sources. Beware, not every coloured diamond should be purchased as an investment stone. Pink and yellow diamonds with great quality are good investing diamonds. But, they are rare as ‘rare’ can be... so happy hunting.
Another major concern people seem to have about investing in diamonds is their valuation. Unlike gold or silver, there is no simple cost per ounce valuation system for diamonds. Therefore, potential investors can be left wondering whether different appraisers will assign their diamond the same value. Also, the cut, colour, carat and clarity - the “four Cs” used to determine a diamond’s value - can combine in countless different ways. In other words diamond valuation can be subjective. No two appraisers give valuations that are identical, it varies by 20 percent or more. So, how do you know the real value of your stone?
In regards to certifications, some market leaders only recommend purchasing diamonds certified by the Gemological Institute of America as they come with a certificate of valuation that is recognized in most locations around the world.
Ofcourse, there is the question of liquidity, both for diamonds themselves and for the ETF.
Some market watchers feel that the diamond investment market is still in its infancy and risky for those who aren't well aware of the industry. According to them, for ordinary investors, it's too early to venture in. One market analyst feels that there is surely a potential for diamond investing to grow. But the questions of price transparency and liquidity alone make this a risky bet.
Some industry leaders have their own opinions about diamonds as investment vehicles for small investors in India. This is what they have to say:-
‘Branding’ is a must for Jignesh Mehta, Managing Director - Divine Solitaires, who has this to say:-
A few factors that could be listed in favour of diamonds as an investment are, gold is becoming more and more expensive, and Diamond’s true value can be ascertained due to the transparent prices, Investment and lifestyle quotient, Certifications for diamonds by a reputed institute leading to increased customer trust while purchasing diamonds, Protection against inflation.
Divine Solitaires is the first diamond brand in India to bring Nationwide Standard & Transparent Price List which guarantees complete transparency and also assures customers to get true value for money. This price list is updated every month in a main stream newspaper. This Price List allows customers to know the prevailing rate of their diamond at the time of up gradation or selling and helps them to get the true appreciated value of their diamond. This Nationwide Standard & Transparent Price List is issued on 1st of every month.
Also, to empower the customers and make them aware of the of the current price trends of diamond, Divine Solitaires, revolutionary idea of introducing “Solitaire Price Index” is the first time in India .The price is calculated from the Divine Solitaires Price List as an average of all the prices of 0.18cts to 1.00cts of Round Brilliants diamonds which helps diamond buyers to keep track of the diamond prices on a regular basis and helps them making a logical buying & investment decisions. Every diamond of Divine Solitaires has a Unique Identification Number which is laser inscribed on the girdle of the diamond which makes the diamond identifiable.
Ghanshyam Dholakia of Hari Krishna believes that ‘diamonds are forever’ and he has this to say:
No two diamonds are alike; each is a separate creation of nature. This is what makes a diamond the rarest, most beautiful and most valuable of all. Nowadays what people want is “value-addition” from everything.
Compared to any luxury items like car, expensive mobiles, branded watches or shoes and even apparels; diamonds have only appreciated. In last 10 years the prices of luxury items have sky rocketed (more than doubled) whereas diamond prices have gradually increased.
Luxury items depreciate over a period of few years and they have temporary value-add or consumption value; while diamonds have lifetime value addition.
Also, diamonds are passed on from one generation to another, whereas the same is not true with other luxury items.
For Colin Shah, Managing Director, Kama Schachter, ‘size matters’ and he has this to say:-
Diamonds are good to invest in!! However unlike gold they need high capital. With the new RBI policy sourcing hard gold may become a problem; in times such investing in diamonds may seem like a good option.
One must also be aware that big rocks are the ones that fetch good returns over a period of time. So if long term investment and have the capital is on mind then invest in diamonds. Also make sure that your investment is insured from theft and damage.
Diamonds come with authenticity certificate but it is always advisable to purchase diamonds from authentic and reputed dealer. Having knowledge about the 4 Cs, cut, clarity, colour, carat is an advantage.
Know the diamond that you are investing in. A reliable diamond trader can help you get the best results for your investments. Unlike gold, diamonds are not traded on public exchange, so speak to your trader or diamond dealer and stay updated about the rise in diamond prices. This will help you understand the return of investment in the long term.
Purchasing diamonds from a reputed dealer will also save you the retail mark-up. For better returns make sure you invest in conflict free diamonds. At Kama Schachter, our diamonds are meticulously selected only after an exhaustive evaluation and are sourced from conflict free sources. Every diamond comes with a GSI certification that verifies the authenticity and natural integrity of our diamonds and is backed by lifetime warranty.
Conclusion
Gone are the days of superstition and ‘myths’. It’s a new world for Indian small investors with countless possibilities. The scenario seems to be changing, with the entry of trusted diamond brands in the market and well informed customers making the right purchasing decisions. These days Solitaire diamond is considered as a luxury item and great investment option. And customers are now willing to pay the high price keeping the future perspective in mind. When buying diamonds, the buyer takes hold of the physical asset. A comfortable feeling because regardless of what happens to the company or the financial situation, they still hold the hard tangible asset in hand. Simply put diamonds as a hedge against inflation.
Investing in diamonds is now being considered by some as safer than gold, as it is easy to transport them. Plus, gold prices are influenced by many factors, while diamond prices are real and keep increasing, giving customers the value that’s worth the true value. Today, in India, diamond is viewed increasingly by the customers as being as an attractive option for investment as it offers an excellent return, besides being high on the fashion quotient as well. Some investors feel buying loose and certified solitaire diamonds a wiser option rather than having them embedded in jewellery since they are easy to store, transport and handle. When it comes to selling them, there is also a relatively easy liquid market for them.
Having said that, it is may not be wrong to reiterate that Gold and Real Estate are not going anywhere. They are here to stay and the future sees gold, real estate... and now diamond co-existing as ‘investment options’ in India!
Aruna Gaitonde, Rough&Polished, Mumbai
