A few weeks ago I was interviewed by Charlotte McLeod of Diamond Investment News.
Natural Fancy Colored Diamonds: A Guildhall Education
Friday March 14, 2014, 4:30am PDT
By Charlotte McLeod – Exclusive to Diamond Investing News
Natural fancy colored diamonds are becoming more and more popular as an investment choice, and with that popularity, many questions are arising.
For instance, investors are often unsure about what qualities to look for in such diamonds, and may be concerned about how to resell them. The fact that there is no simple cost-per-ounce valuation system for diamonds also leaves some people unsure if they should buy.
Those are just a few of the reasons thatGuildhall Diamonds, which describes itself as “catering to the needs of both the diamond investor as well as the discerning individual looking for the unique beauty of color diamonds,” recently launched a website that focuses on educating new buyers about colored diamonds.
To learn more about why Guildhall emphasizes education, Diamond Investing News (DIN) spoke with Nicole Snitman, GIA D.G., A.J.P., who does internal diamond grading and stone selection at the company. In the interview below, she also touches on what qualities to look for in a diamond and what she believes is in store for the market in 2014.
DIN: Your recently launched website places an emphasis on educating new buyers about natural fancy colored diamonds. What inspired you to shift focus in that way? (Why is education so important?)
NS: We really feel like there is a lot of inaccurate information out there, particularly online. So what we wanted to do was give our clients and potential clients a better understanding of what are truly considered investment-grade diamonds and why we’re so particular about our diamonds at Guildhall. We figure that if more people can appreciate the rarity and beauty of these diamonds, it’s better not only for the customer, but also for the industry as a whole.
DIN: What about more seasoned investors? Are you able to cater to them as well?
NS: Definitely. All of the diamonds we procure are of the highest quality, so they’re always in line with what seasoned investors are looking for. That means fantastic color, high clarity and beautiful cuts.
DIN: One common concern people seem to have about investing in diamonds is that they can be difficult to resell. Does Guildhall offer a service to help investors do that when the time comes?
NS: Yes, we do. We have a wonderful resale program, but on average we find that clients tend to hold their investments for longer periods of time to see increased value. Reselling diamonds of the high caliber we carry is never actually a concern for our clients because these types of diamonds are always in demand.
DIN: I noticed that Guildhall also has a division that helps investors set their diamonds into jewelry. Is that service in high demand? I imagine it would be hard to make the decision to sell a diamond once it’s in a beautiful piece of jewelry!
NS: We find that people want to put their diamond into a piece of jewelry such as a pendant or a ring so that they can enjoy their investment while it accrues in value. Once the diamond has been set into a custom piece, owners can pass it down to future generations as an heirloom. This is definitely a growing part of our business — we call it Wealth to Wear©.
Once a diamond is set in jewelry, you can have it professionally taken out in order to resell it . I’ve actually sold the yellow diamond out of my own cocktail ring; I had it taken out by our jeweler at Guildhall so my client could store the loose diamond — it’s sort of an occupational hazard I suppose.
DIN: Another concern I’ve noticed is that people feel diamonds are valued subjectively as there’s no simple cost-per-ounce valuation system for them. What would you say to someone with that worry?
NS: I would say first of all that I understand the concern, but it shouldn’t be a concern. This isn’t like white diamonds where there’s an abundance.
I personally like that there isn’t a centralized system to evaluate diamonds; I find that each diamond is unique, really like a piece of art. And even though there isn’t a cost per carat that you can just go look up on a chart, there are value parameters in place. So with independent appraisals and GIA grading reports, people can get a good idea of what their diamond is worth. You can also look at auction records as evidence that important stones are in high demand.
You really have to trust experts like Guildhall to know what’s going on in the markets. We speak to our suppliers and industry experts on a regular basis about what’s happening at auction and what’s going on with investor demand.
DIN: How long should an investor expect to have to hold a fancy colored diamond to get a good return?
NS: That’s a really good question. Usually the longer you hold the diamond, the better the return. What I really want people to understand is that acquiring natural fancy color diamonds is not like flipping a home or trading stocks, for example, so you wouldn’t want to just wait a year or two and expect strong returns.
But to answer your question, if I had to give an amount of time for a solid return, I would say 10 to 15 years is a nice duration. But again, it’s going to depend on the type of diamond you’ve purchased and most importantly, the body color.
DIN: Do you find that people are usually okay with waiting that long?
NS: Yes, people who have educated themselves properly about this asset class truly understand and appreciate that the longer they hold their diamond, the more money there will be in the investment.
Because our clients tend to purchase color diamonds for retirement or for their childrens’ education, they are perfectly fine with the amount of time we recommend holding a diamond.
DIN: Looking at your blog, I saw that you did a post awhile back about color modifiers in diamonds, a topic that doesn’t seem to be talked about much. Could you go over what they are and how they affect diamond value?
NS: Fancy color diamonds can contain more than one color because when they are formed, trace elements combine with carbon atoms to create the color. Sometimes there will be more than one trace element, creating a variety of colors. The main color is the last color that you see on a grading report. For instance, in the case of a yellow-orange diamond, orange is the hue of the diamond.
Depending on the color modifier, it can bring up or decrease the value of a diamond. Color modifiers can also produce the most exotic, beautiful colors. You can get seafoam green, purplish pink — really beautiful, beautiful colors.
DIN: So sometimes modifiers increase a diamond’s value and sometimes they decrease it. Can you expand on that?
NS: It depends on the modifier. Take a brownish-yellow diamond. Even though yellow is the diamond color, having the brown modifier actually brings the value down because brown diamondsaren’t considered investment grade. A greenish-yellow diamond, on the other hand, would definitely increase the diamond value because green diamonds are much rarer than yellows.
DIN: What color of diamond is currently the most popular?
NS: First-time investors typically buy pinks and yellows, which are always popular. The more of a collection you have, the more you tend to go for the exotic colors, the rarer colors — the greens, the blues.
That said, all of the diamonds in our collection are investment grade, so it really depends on what you’re comfortable with, what your budget is and what appeals to you. Oftentimes someone will come to our office with a yellow diamond in mind and end up purchasing a pink. Or they wanted a pink and then they see a yellow that they fall in love with. We always say at Guildhall that it’s “the diamond that chooses you.”
What we recommend most of all at Guildhall is strong color saturation, high clarity, good carat weight and a beautiful cut. If you have all of those contributing value factors together, you’re going to get a stunning diamond, and that’s going to bring value.
DIN: Finally, what’s your outlook for the diamond market in 2014?
NS: I think it’s going to be very exciting because investor demand continues to soar, and so does general public awareness. With that awareness and more investors flocking to this investment, there’s also diminishing supply, particularly because people aren’t selling their diamonds, they’re holding onto them.
Those fundamentals are creating increased prices, and I really think that prices are going to continue to soar. I also think that if any important diamonds come to auction, auction records will continue to be broken. All in all, it will continue to be an extremely exciting market in the foreseeable future.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Interviews conducted by the Investing News Network are edited for clarity. The Investing News Network does not guarantee the accuracy or thoroughness of the information reported. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Here is the full article at diamondinvestingnews.com.