Diamond Investing 101

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Q: I’m new to diamonds. I’ve heard something about the 4C's, but can you explain what they are?

The Four C’s refer to a diamond’s Color, Clarity, Carat Weight, and Cut-Quality.

Color refers to “absence of color.” The less “yellow” in a diamond the better. Color is measured alphabetically with D the best, and Z the worst. In practice, colors below M would rarely be sold in a jewelry store. Anything I or above is quite good. When set in gold jewelry, it would be difficult to see a difference between an I and a D.

Clarity refers to absence of imperfections (inclusions) inside the diamond, such as carbon spots, feathers, etc. The grades are:

  • Flawless (FL)
  • Internally Flawless (IF)
  • Very, Very Slightly Included 1 (VVS1)
  • Very, Very Slightly Included 2 (VVS2)
  • Very Slightly Included 1 (VS1)
  • Very Slightly Included 2 (VS2)
  • Slightly Included 1 (SI1)
  • Slightly Included 2 (SI2)
  • Imperfect 1, (I1)
  • Imperfect 2 (I2)
  • Imperfect 3 (I3)

Theoretically imperfections are so small in SI2 and better that they are not visible to the naked eye. You need a “loupe” (magnifying glass) to see them. The three “imperfect” grades all have eye-visible inclusions.

Cut-Quality is very complex, and involves multiple characteristics we won’t get into here. Cut quality has the greatest impact on how beautiful a diamond is. The very best is “Triple Excellent.” Because Icecap is selling diamond tokens on a platform where the diamonds can’t be seen ahead of time, our Program Standards allow only “Triple Excellent” cut grades. This ensures a buyer—when/if they redeem the token—will never be disappointed when they see the diamond. In other words, every Icecap diamond token has a perfect cut-quality grade.

Carat-Weight obviously refers to a diamond’s size. A carat = 200 milligrams. It is usually shown in hundredths of a carat, such as .57 or 1.34.

Q. Are there other factors—beyond the four C’s—which determine a diamond’s value?

Yes, quite a few, and unfortunately most diamond buyers don’t realize this. This is the reason you can go to any popular e-tail site selling diamonds, perform a search for—say—a one carat, G, VS1, Triple Excellent, and get back a list of diamonds that vary in price by as much as fifty percent. Obviously, factors beyond the 4C’s are in play. In the trade, a diamond suffering from one of these other factors is called a “problem stone.”

An example of some of these “problems” would be diamonds that have strong flouresence, graining, or clouds. These are gemological properties that make the diamond less beautiful. But there are other factors as well. The date of the grading certificate can make a difference. How accurate the grading certificate is can make a difference. Whether a diamond might have been damaged (chipped for example) since the grading certificate was issued, can make a difference. Plus there are others.

Q. What about grading labs. There seem to be quite a few. Which ones can I trust?
In our opinion, none of them, because mistakes happen. Every certificate should have a second opinion. That said, the most respected labs in the world are the Gemological institute of America (GIA), and the American Gem Society (AGS). They are equally good, but the GIA is far better known. The lab with the tightest standards in the world is Gem Certification and Assurance Lab (GCAL). GCAL now provides a service known as a DiamondAudit™ in which they essentially “audit” other labs’ certificates, and apply their extremely tight grading standards to the process. A GCAL diamond audit is backed up by an actual guarantee. They will refund the difference in value if one of their audited stones is ever determined to be a lesser grade. This guarantee is backed up by an actual insurance policy. No other lab or verification company in the world provides such a guarantee. In our opinion, the best choice is a diamond with a GIA certificate, and a confirming audit report by GCAL.
Q. What types of diamonds are appropriate for investors?

This is a hot topic, but we have strong opinions about it. At Icecap, we use the phrase “Investment Grade Diamond” to mean a diamond which is easy to sell, not just easy to buy. This is because investors need liquidity. A diamond that’s easy to sell will be one that (a) rates well on the 4 C’s, (b) is not a “problem stone” (see above “Are there other factors…”), and (c) is round. (Rounds stones are simply far more popular, and thus are easier to sell.)

Q. What is an “investment grade diamond” in Icecap’s opinion?

Icecap only tokenizes what we consider Investment Grade Diamonds, which means they must meet the following specifications:

  • Color: I or better
  • Clarity: VS2 or better
  • Cut Quality: Triple Excellent only
  • Carat Weight: .50 cts or larger
  • Shape: Round
  • Other: “Problem stones” are screened out. (Details of this available on request.)
  • Grading: GIA certificate no more than two years old, and GCAL DiamondAudit™ of certificate, with guarantee.
Do diamond prices for the different types of diamonds move differently, or generally all move together, up or down?

Diamond prices don’t all move in the same direction, but the subtleties are small compared to overall direction of diamond prices. With respect to which ones to buy, it’s a matter of personal preference. If you might enjoy the diamonds as jewelry, rather than leave them in a vault, that might influence your decision.

There are many Icecap diamond tokens on Open Sea. How do i know which one(s) to buy? Am I better off with one large diamond, or several or more smaller ones?

Because Icecap only offers diamonds we consider “investment grade” (as defined above) it probably doesn’t matter too much which ones you choose, but our advice would be this: whatever your budget, diversify into several or more diamonds, not just one. This gives you more flexibility when it comes to liquidating some or all of your diamond assets.

Beyond that, we suggest diamonds that are similar in terms of color/clarity ratings. In other words, choose high color and clarity, or choose low, or something in between. But a diamond with—say—very high color, and very low clarity, or vice versa, might be more difficult to sell.

To make it very easy, each day Icecap suggests a few diamonds, out of all those offered for sale. One below $5,000, one that is between $5,000 and $10,000 and one above $10,000. Use the OpenSea filter “other” and choose “Help Me Choose.” See today’s selection below or at Opensea here.

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