When miners at the Leseng mine in the Kingdom of Lesotho unearthed a giant diamond, they could not believe their eyes. Weighing 478 carats in its rough, uncut state, and boasting remarkable color and clarity, it has the potential to yield a 150-carat stone. Once cut, the diamond is expected to fetch at auction a record-breaking market price in the tens of millions of dollars.
Add jewelry to works of fine art, grand estates, period furniture, collectible cars, rare vintage wines, and other possessions of deep emotional and financial value.
Diamonds are a global currency considered less volatile than gold, silver and other precious metals—and viewed by some as a hedge against more traditional, albeit less-aesthetically pleasing, investments like stocks and bonds. Small wonder why in an economy dominated by the topsy-turvy stock market, many high-net-worth individuals are buying more "bling."
By the middle of 2010, rough diamond prices established by the Diamond Trading Company rose 17% from average prices recorded at the beginning of the year. Historically, the story is even better. A five-carat investment-quality diamond of exceptional color and quality will sell at wholesale for $349,500 today as compared to $240,000 four years ago, according to Gem Guide, which is published by Gemworld International. For truly extraordinary pieces of jewelry, market prices are stratospheric, doubling and tripling in value in the course of a decade.
Regardless of their value, diamonds, gold and other precious gemstones and metals are fun and exciting to own and wear. The only downside is the risk of misplacement, damage and theft—the latter the primary cause of financial loss. Fortunately, there are ways to reduce these threats and mitigate potential financial costs through insurance.
Market Mania
Golden Jubilee Diamond, left, at 545 carats, both gems, part of the British Crown Jewels today, would likely find willing buyers were they offered for sale at auction tomorrow. Their rarity virtually guarantees rising value—hence their investment appeal.
