COLORED DIAMONDS GROWING AS AN ALTERNATIVE INVESTMENT
Diamonds are one of those unique investments that can be purchased in one currency and sold in another, providing a hedge against inflation that devalues the purchasing currency. Diamonds are not only a tangible investment, but they are highly portable, easy to store, and of course wearable.
Why are Colored Diamonds Getting Rarer?
While colorless diamonds are relatively easy to come across, colored diamonds bring a whole new meaning to the word “rare”. More specifically for every 10,000 stones that are mined, only 1 will be a colored diamond.
Colored diamonds are becoming harder to find and even harder to mine. Some of the longest producing mines are nearing the end of their profitable life. A good example would be the famous Argyle mine in Western Australia. This mine has been responsible for producing 90% of the world pink diamonds, with a quality unrivaled by any other globally.
However, the 2020 closure of the Argyle mine has not only affected the diamond production industry, it has also greatly impact the investment market, and possibly history as a whole.
The exhaustion of mines is not the only issue, many companies are also greatly limited by the current mining technology. This means that even if there were hills of pink diamonds, at the levels of current technology it would not be feasible, time effective, or even profitable to extract them.
So the question remains, with all the above in mind, how will colored diamond investing be impacted by these factors in the future?
Colored Diamonds are a Safe Haven for Investors
Fancy color diamonds are seen as a stable asset class and have been so for some over 20 years. Total appreciation between 2005 and 2019 for pink, blue and yellow diamonds have been exponential as we can see from the FCDR Index provided below. Truly massive numbers if one takes into account that they were documented during a great financial crisis. It is therefore safe to assume, as the colored diamond market continues to grow in unprecedented numbers globally, that fancy colored diamonds are still seen as a safe haven by investors and experts alike, as they are largely unaffected by financial turmoil.
A Lesson from a Seasoned Billionaire Investor
As noted, colored diamonds are a stable asset class, and if you take into account the tactics of Joseph Lau, billionaire investor, we can see why. In the last few years, this investor has had a history of purchasing high-valued colored diamonds for his daughters. These diamonds, while outside the reach of most individual investors, are nonetheless part of a comprehensive wealth management system that doubtlessly includes estate planning. Diamonds passed as gifts or held in trust for minor children may be classed as gifts rather than as items of an estate, and taxed at a different rate; or if held as part of a living family trust, may not be taxed at all. Consult your tax experts for specific insight here. A highly competent attorney, specializing in wills, trusts, and estates can help you plan your estate to preserve value, minimize tax hits, and circumvent the probate courts.
Whatever your reason for choosing to invest in colored diamonds, you owe it to yourself and your family to work with a knowledgeable consultant who will guide and educate you in your chosen investment strategy. Alternative investments have less liquidity than traditional investments and can require a longer outlook than stocks, bonds, and other instruments.