Investment Risk Series: Issue 4

Planning for the Worst

We are now more than halfway through this 6-part series. We hope you’ve enjoyed the content so far. This week, we are discussing how to plan for worst-case scenarios when it comes to Fancy Color Diamond investing.

In the coming weeks, we will discuss various risk strategies to finish the year off with low-risk investments in mind. We have a broad range of readers - from first-time investors to seasoned clients who have worked with us for many years, so we will be addressing various investor ranges throughout this series.

Part 1: Understanding how much money it takes to invest

Part 2: Deciding how much risk you’re comfortable taking

Part 3: Decide which markets you’re interested in exploring

Next week’s blog: Diversify your portfolio

Planning for the worst

Once you have identified the potential markets for your entry, it is essential to formulate a comprehensive strategy. Consider what you would do in an ideal situation with significant gains. Would you allocate them towards savings, covering expenses, or reinvesting them? Conversely, contemplate your plan for recovering from potential losses in a worst-case scenario.

Assess your risk tolerance and establish the threshold at which you would consider altering your strategies. Furthermore, develop a contingency plan (Plan B) to address any unexpected circumstances or challenges that may arise.

When considering FCDs, purchasing can take a week and up to 3 months, depending on how specific our clients’ requirements are. We have clients who let us know how much they have available to invest and ask us to get the best deals on their behalf. Other clients know exactly what FCDs they want right down to the girdle thickness. The more specific you are, the longer it may take to find the exact diamond, especially since more investors are holding their diamonds indefinitely as their market and auction values steadily climb.

When purchasing Investment-Grade Fancy Color Diamonds, make sure to know the company or firm you are purchasing from. There are very few legitimate companies within the diamond industry that solely focus on investment-grade diamonds. Be careful to not be scammed by frauds who claim to specialize in “investment diamonds,” or by retailers who claim to be investment specialists.

When considering diamonds for purchase, allow time for the diamond to go through the proper due diligence process. The source must be verified, the diamond must be inspected, a GIA Report must be ordered if there is not a current one available, the diamond must be insurable, and the owner must be authorized to sell the diamond (meaning, not stolen or from a prohibited source).

Potential investors should understand that FCDs are valued differently than colorless diamonds. Each Fancy Color Diamond is evaluated independently of all other diamonds, including other diamonds that are also that color. Many factors decide how valuable and rare a diamond is, and many factors will decide how marketable the individual diamond is.

A risk to also consider is damage. We always recommend to our clients that they store their diamonds in a secure vaulted location, such as with Malca-Amit. However, some of our clients choose to wear their diamonds and enjoy them. If you own the diamond, you are free to choose what best supports your long-term goals, including enjoyment. However, if the diamond gets scratched, chipped, dulled, or shows any signs of wear, it will significantly decrease the value of your investment diamond.

To reinforce, Fancy Color Diamond investments area long-term strategy. You will maximize your earnings if you hold your investment diamonds for 5-10 years. Upon selling, this process can take one week and up to a year. Finding the right buyer is all about timing, relationships, and market interest. This is why we ensure our clients receive the most coveted diamond colors (red, pink, blue, green, and D Flawless), because these are timeless, and the most desired by investors and collectors globally.

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Please email FCD Invest at info@fcdinvest.diamonds to discuss your personalized long-term investment strategy. For more information on Fancy Color Diamonds as an investment, please visit our Fancy Color Diamond informational page linked here.