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Are diamonds a brilliant investment?


It's Blingtime. What better way to show your intention or your heart's affection than to dazzle a loved one with a rock? After all, Richard Burton knew the way to Elizabeth Taylor's heart was via important diamonds (the super-sized ones). And Taylor clearly understood their value whether worn or stored.

The Chinese proverb "Better a diamond with a flaw than a pebble without one" probably carries more weight today than when it was written. Not because the diamond market in China exploded recently as more Chinese have become millionaires and billionaires. Rather, the proverb reminds us that there's more to diamonds than sparkle and sentiment: They are, in many ways, the world's ultimate quiet investment.

Diamonds indeed are an American girl's -- and guy's -- best friend. We are the largest purchasers on the planet of what's considered to be nature's hardest asset. But in addition to cut, clarity, color and carat weight, a hand or arm dripping in diamonds says one thing while a pocket -- or safety deposit box -- filled with these gems ancient Greeks believed were the tears of the gods, says quite another.

Prices on certified polished 1-carat diamonds rose about 19 percent last year, according to the Rapaport Group's RapNet Diamond Index, a benchmark followed by those in the diamond industry. In 2012, the trend is expected to continue, particularly for investment diamonds -- those between 1 and 5 carats.

Specialty, rare and important diamonds are likely to see greater price increases this year because of their rarity and size. Important diamonds are those of serious size, as in more than 5 carats, and into 10 or 20 carats or even larger, and whose brilliance can be spotted from across a room.

John Bianco, director of Circa in Palm Beach, grew up in the diamond industry. "The demand for large diamonds worldwide is excellent, like 6, 7 and 8 carats or larger," he said, "especially with the advent of the foreign markets. China and India are burgeoning markets."

But Bianco said he has some reservations about considering a diamond as an investment.

"I think of an investment as something that if you put money into, it will give you back a certain amount of money whether it's 1, 3 or 5 percent. A diamond doesn't do that, but it can appreciate over time."

It's that appreciation that may be overlooked for couples focused on the meaning behind giving or receiving the diamond rather than its long-term potential worth or value.

With romance aside, much of today's interest in diamonds goes beyond the heart and into the reality of the very changing, challenging and uncertain world in which we live.

Tobina Kahn, vice president of House of Kahn Estate Jewelers in Chicago, said many clients are beginning to see the purchase of large diamonds as a way to preserve their wealth.

She tells the story of a client who lost a fortune in the markets and told her husband not to buy stocks or bonds. She wanted a diamond instead. "And a big one!"

"So people are seeing specific events that are going on in the United States and around the world and saying, 'Gee, I want something that I can see, touch and feel -- and can store as a value of wealth.'"

Kahn is not alone in this observation. Moneca Kaufmann, president of Kaufmann de Suisse Jewelers on Worth Avenue, says many wealthy clients are concerned.

"There's a value to diamonds you don't find in other investments," Kaufmann said. "You can't melt a diamond, they don't burn, aren't made of paper and are very easy to transport."

Bianco also said portability is of value.

"You can put a million dollars [worth of diamonds] in your pocket and get on a plane and no one will notice. There isn't too much else you can do that with," he said. "You can't really do that with money, you can't do that with bonds, you can't do that with gold, but you can do that with diamonds."

Whether cupid's arrow has you diamond hunting or the idea of making a valued portable investment, buying diamonds can be tricky. Aside from understanding the 4Cs (cut, clarity, color and carat), there's the question of where to purchase them.

Choices here range from high-end luxury jewelers to the secondary market represented by estate jewelers. The others are the Internet and big-box retailers. Costco stores, for example, sell diamonds.

"I didn't know you could buy diamonds where you buy potatoes," said Adele Kahn, Tobina's mother and the proprietor of The House of Kahn on Peruvian Avenue.

In the Costco on Northlake Boulevard is a notice directing shoppers interested in diamonds 1 carat or larger to the Costco website. There, I found a 3-carat solitaire diamond ring selling for around $45,000. The Sam's Club website offers diamond rings, as well. Prices are just not as high.

You'd be unlikely to find a jeweler of any repute suggesting you buy a diamond online. Where's the romance in that? Or the helpful eye of a professional salesperson? Or the "Oh darling I love you so much" experience buying it together?

Putting aside price and economic and political concerns, diamonds may be a hard asset and a source of wealth for many generations to come. And they are still as personal a gift someone might give -- or receive.

When faced with such a purchasing dilemma, Bianco offers this simple advice: "If you buy what you love, you will always do well."

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