How To Invest In Colored Diamonds: Ultimate Guide

Fancy colored diamonds have long been prized for their beauty and their scarcity. It was their rarity that led them to be valued so highly by royalty. Since the 1600s fancy colored diamonds have been the exclusive realm of the sophisticated diamond connoisseur. A number of the world's most important and historic diamonds have been fancy colored, from the liquid blue of the Hope Diamond, through the lush hues of the Dresden Green, to the stark beauty of the Pink Agra. Because of their exquisite colors and due to the fact so few exist, fancy colored diamonds have always kept their value:

In 1995 the Gemological Institute of America (GIA) updated their fancy colored diamond grading system. For the first time the entire range of colors could be described and compared based on an independent evaluation. From this point the value of these diamonds has increased dramatically.

Colored Diamond Investment

Colored diamond investment.

The only truly accurate available pricing information for these diamonds is through auction house records. Invariably the prices have increased in every color grade range, and in some cases this rise has been dramatic. For example, fancy vivid blue diamonds have increased in value more than 500% on average from about $300,000 per carat to more than $1.5 million per carat.

The price of fancy pink diamonds has risen dramatically as well, from less than $50,000 per carat to more than $300,000 per carat, over the past 14 years. Today pink diamonds are viewed as solid investments given the projection that their supply is limited. As mentioned, the Argyle mine in Australia, which produces over 90% of the world's pinks, is set to run out of mineable material and cease production. At that point the number of available pink diamonds will diminish significantly, and their prices should rise accordingly.

Fancy colored diamonds stack up very favorably against investments in financial instruments or colorless diamonds.The average price of all colored diamonds sold at auction have increased in price more than triple the prices of 3 ct colorless diamonds and platinum over the same period.

At the end of the same 10 years, the average price of all colored diamonds sold at auction is more than five times the returns on the Dow Jones Industrial Average.

Only 20 diamonds have achieved prices of greater than $1,000,000 per carat. All of these occurred between 2008 and 2012, a period of great global economic upheaval, drawing the reasonable conclusion that color diamonds are viewed as a safe haven in any economic climate.

In our guide about diamond investment we shared with you all of the insights we have on the matter - the pros the cons and the risks.

The pros are portability, durability, inflation proof, psychology and expected increase in demands. The cons and risks are lack of price transparency, lack of tradability and time - diamonds should be considered for medium to long term investment.

We also emphasized all of the advantages of using colored diamonds for investment as opposed to regular colorless diamonds.

In this guide we will cover the technical aspects specifically related to investing in colored diamonds, what makes a colored diamond an investment grade diamond and how to choose this one of a kind diamond.

Investment Grade Diamonds

Investors look at the investment as an equation - on one hand what we are willing to risk and on the other hand what we expect to earn. Risks vs. potential earnings.

Investment grade diamonds are diamonds that have some unique characteristics that can overcome or at least minimize the cons and risks involved in the investment and that have better chances to increase in price, to appreciate over time. By playing on both sides of the equation we dramatically improve our chances for success.

The beautiful thing about a natural colored diamond is that by definition the starting point is much better than in regular colorless diamonds. They are rare enough due to the fact that only 0.01% of the diamonds is a natural colored diamond (1 of 10,000 diamonds) and on the other side we see more and more celebrities with colored diamonds engagement rings that are constantly increasing the awareness and demand.

Another great advantage is that unlike colorless diamonds that can be found in every shape, size and color, each colored diamond is unique. When considering the 4Cs (Cut, Color, Clarity and Carat) of diamonds and colored diamonds, naturally, an extra weight is given during the manufacturing process to the color aspect. This is why every diamond is unique. For example, a slight change in the pavilion angles and the color of the diamond will turn out differently. So when the time comes to sell, if you have a good product someone is bound to buy it because he can't find it elsewhere.

Prices Of & Choosing Colored Diamonds

Colored diamonds are diamonds that have a noticeable body color when viewed in the face-up position. Brown and yellow are the most common colors in natural colored diamonds. Diamonds with natural pink, blue, orange, green, red and violet body colors are extremely rare.

Out of 30,000 diamonds, only a few will have one of the extremely rare colors. The color can have any intensity between "very light" and "vivid". To be considered a "colored diamond" the color must be noticeable when the diamond is in the face-up position. Black and gray diamonds are also possible.

A combination of rarity, beauty, and intense buyer interest drives the prices of colored diamonds. The rarest colored diamonds often sell for millions of dollars per carat. They have more value for their size than almost any other material. At the same time, some colored diamonds sell for prices that many people can afford.

Probably the best way for you to choose and decide will be based on the budget you have. Within this budget you can decide (might be even wise) whether to split it into 5 x $5,000 diamonds or to buy one $25,000 diamond etc.

Colored diamonds are rare but if we need to split them into pricing levels (which are naturally a result for rarity levels) we'd split them as follows:

Please note that even though we state above that brown diamonds are relatively common, there is nothing common (or cheap) about a 10.00 carat brown diamond with VS clarity.

Also keep in mind that this classification into groups is a very general one. There are hundreds of colored diamonds colors made out of combining the base colors and each is treated differently.

The price of a colored diamond depends on more than its hue. Color saturation and the uniformity of color across the face of the gem are also important. Those with a pure hue are generally more desirable than those with modifying colors. As with all diamonds, the size of the gem and the quality of the cut are also very important.

In the past decade, colored diamonds grown in laboratories and natural diamonds with color produced by treatment have become more common in the market. These diamonds are not rare, and they sell for lower prices than natural diamonds with colors of natural origin. To ensure the identity of what you are purchasing, gemological laboratories can examine a diamond to determine if it is natural or laboratory grown. The labs can also determine the origin of a diamond's color. These laboratory services have a cost that is very low compared to the cost of a diamond. Identification and grading by a reputable laboratory is an essential part of any colored diamond transaction.

The investors goal will be to find a diamond within their budget that is desired and known yet not too rare or too special so there will be a market for it.

Modified & Secondary Hues

Very few diamonds have a pure hue, such as red, blue, green, orange, or yellow. These are the most sought-after diamonds, and their prices are usually very high. Instead, most colored diamonds have a color that is intermediate between pure hues such as yellow and green. As an example, yellow diamonds might exhibit hints of green (greenish yellow) or orange (orangy yellow). The possible colors of diamond form a gradient of colors across the visible spectrum.

The existence of all of these intermediate colors suggests that the processes that cause color in diamonds are very complex, and that multiple causes of color can exist in a single diamond. This is what produces the incredible spectrum of diamond colors that are possible in nature.

The diamonds that depart from a pure hue provide buying opportunities to the shopper. They usually sell for lower prices than diamonds with a pure hue. Buyers who like them and can afford them can obtain a colored diamond at a lower price than a diamond of premium color.

Colored Diamond Investing

Besides for the general instructions regarding how to buy investment diamonds like buying only GIA certified diamonds etc., there are certain technical specifications about the diamonds themselves that we recommend ensuring they exist (or do not exist):

GIA certificate

If you are buying or selling a colored diamond, it is a good idea to have an independent laboratory, the best-known source of colored diamond grading reports is the GIA, examine the gem and determine:

  1. If the material is indeed diamond.

  2. If the diamond is natural or lab-created.

  3. If the diamond's color is natural or a product of treatment.

  4. If the diamond has been subjected to any other treatments.

  5. The color grade of the diamond.

Make sure you have a certificate from an independent laboratory. It is the only way to truly know what you are buying. Also, your buyer would want to see it as well.

Diamond color

In terms of color, the "ultimate diamond" has either a complete lack of color or a highly saturated color in a pure hue. An extremely rare diamond will occupy one of these positions.

Those which approach a complete lack of color are graded on the D-to-Z color scale developed by the Gemological Institute of America. A diamond with an absence of color earns a grade of "D" and is said to be "colorless". Progressing down the scale below D, at grades of E, F, G, etc. diamonds will exhibit very small amounts of color. The color is usually yellow, brown or gray. This grading is done in the table-down position.

A rare percentage of diamonds will exhibit traces of other colors such as pink, blue, orange, green, etc. If the color of these diamonds is noticeable in the face-up position, they will earn the term "colored diamonds" with colors described as "faint', "very light" or "light". People familiar with colored diamonds will immediately recognize "faint" color. But, inexperienced persons might not notice "faint" color unless they receive a cue to look for it or have a comparison stone nearby. Diamonds with "very light" or "light" color are much more noticeable.

Diamonds that have enough color to exceed "Z" on the D-to-Z scale will receive a grade known as "Fancy". Depending upon their tone and saturation when viewed in the face-up position, they will be given fancy grades (see 'colored diamond intensity').

The names of these grades are important, and they are to be capitalized in all written communications. Diamonds in all of these grades can be beautiful, but those earning grades of Fancy Intense and Fancy Vivid are the most valuable. All of these diamonds have very rare color.

Grades are assigned to colored diamonds by highly trained experts who work with the aid of colored master stones for consistency. Expert grading is very important because the color grade of a diamond can make an enormous difference in its value.

Anyone who purchases a valuable diamond is wise to pay for the service of a colored diamond report. The cost of the report is very small when compared to the cost of the diamond.

As mentioned, stronger is better! In yellow diamonds go above Fancy Yellows, try to get to Intense Yellow diamonds. In the higher colors, Fancy Light will be a good entry point. A Fancy Light Blue with obvious blue color is highly demanded because it is a lot more affordable (still not cheap) than Fancy Blue yet you still get a blue diamond. In Light and Faint colored diamonds the color is much harder to notice, especially in delicate colors like pink and green and therefore less recommended for investment.


The way we see it, fluorescence in yellow diamonds that are bought for investment purposes is a taboo - don't go there even with the price reduction that comes with it. However, in other colored diamonds is quite irrelevant.


From our experience, low clarity diamonds are harder to sell. When it comes to low clarity colored diamonds, they actually have their place, their clientele, but not as investment diamonds. Often, people really want an expensive color colored diamond like blue or pink or that they do not want to go with such a diamond beneath a certain size, this is when such diamonds come in very handy. This is also true about diamond collectors that wish to have as many colors of colored diamonds in their collection as possible and therefore willing to forget about clarity. However, since you are not a merchant holding hundreds of diamonds, the fact that these diamonds are harder to sell is a red flag.

Our recommendation - The best value and most commercial is the VS2. However we cannot always find exactly VS2 diamonds so here are the guidelines - when considering the lower and mid-range colored diamonds not going beneath VS2 (definitely not below SI1), and with the higher end diamonds not beneath SI1 or SI2 that is eye-clean.

Diamond cut

People tend to confuse between cut with shape. When talking about cut we refer to the quality of its polish (the precision in which it was cut). Does the diamond have fire and brilliance? Does it shine as it should? This is one of the most important things to check. If you buy online make sure to look at the diamond's picture and preferably also a 360 video in order to thoroughly examine it - do not rely solely on the certificate.

Diamond shape

Some shapes are more sought after than others and therefore will probably make the diamond easier to sell later on. Stay away from irregular shapes like a kite, triangular etc. In the more common shapes the ultimate is the round, and then comes the princess, cushion cut, oval and radiant, then pear shaped, heart shaped and marquise. Note that there are hardly round colored diamonds since it is harder to maintain the color in rounds (you usually "lose" one intensity degree due to the way light goes through round brilliants). So manufactures of colored diamonds would often prefer a cushion or oval. This is also why a round colored diamond will be much more expensive.

Carat weight

If you consider the lower end colored diamonds such as fancy yellows and browns then try to stay above 1.00 carat. Even there, it would be most sensible to buy diamonds weighing next to the classic weight steps as it might be more sought after later on. For example, a 1.00 carat fancy yellow diamond makes more sense than an equivalent 1.30 carat yellow diamond which will also cost you at least 30% more. Here are several interesting steps: 1.00 ct, 1.50 ct, 2.00 ct, 2.50 ct, 3.00 ct, 4.00 ct and of course the 5.00 carat diamonds.

Regarding the higher-end diamonds such as greens, blues, pinks, purples and obviously reds - people go down in weight till even 0.15 ct or less in order to be able to put their hands on, to afford, such gems.

There are amazing 0.15 ct diamonds such as Intense Pink and Vivid Blue that are worth tens of thousands of dollars per carat that are snatched almost instantly. 15 points is OK. However, if possible, our recommendation is going above 0.20-0.25 ct and if possible and you can afford it then even 0.50 ct.

Diamonds prices go up exponentially along with the weight. A 0.50 carat intense pink diamond can easily cost six times more than an equivalent 0.20 ct this is because its price per carat is much higher and the carat weight itself is 2.5 times higher - multiply the two and there is your result.

Causes Of Color In Diamonds

Natural diamond is a mineral and a rare form of crystalline carbon. A diamond composed entirely of carbon and with a perfect crystalline structure will be colorless. Diamonds that perfect rarely exist. Instead, most diamond crystals accumulate defects during crystal growth and during their long history within the Earth. Multiple types of defects can be incorporated in a single diamond.

Some of these defects can modify the way that light passes through. They can cause the diamond crystal to selectively transmit some wavelengths of light and selectively absorb other wavelengths of light. Because each wavelength of light corresponds to a different color, selective transmission and absorption will determine the diamond's apparent color in the eye of the observer. Examples of these defects include:

  1. Atoms of elements such as nitrogen or boron substituting for a small number of carbon atoms in the diamond crystal lattice.

  2. Vacant sites for carbon atoms in the diamond crystal lattice.

  3. Minute deformations in the diamond crystal lattice.

  4. Tiny particles of non-diamond materials included in the diamond crystal.

Although the name "defect" is used for these color-causing irregularities within a diamond crystal, the impact of their presence is limited to a color change. Buyers of colored diamonds should not be concerned about them being a durability issue. Each of these defects is described below in more detail:

Atom substitution defects

One of the most common color-causing defects in diamond occurs when an atom of an element other than carbon substitutes for a carbon atom in the diamond crystal lattice. Substitution of nitrogen for carbon can produce a yellow diamond.

Substitution of nitrogen can cause the diamond crystal to selectively absorb blue wavelengths of light and selectively transmit yellow. That transmitted yellow light reaches the observer's eye and causes the observer to perceive an apparent yellow color in the diamond.

Out of all the different elements, only a few have atoms tiny enough to substitute for carbon in a way that produces color. Nitrogen, boron, and hydrogen are among the few that have the ability to substitute naturally for carbon in the diamond crystal lattice.

Substitution of boron for carbon can cause a diamond to appear blue. Substitution of hydrogen can cause a violet color in some diamonds.

Vacancy defects

Exposure to radiation can contribute to the color of a diamond. If a diamond is located near radioactive mineral grains during its time within the Earth, it can be exposed to a stream of high-velocity particles. These high-velocity particles can knock carbon atoms out of their lattice position within the diamond.

This vacancy defect can cause the selective absorption of red light and the selective transmission of green. When the transmitted green light reaches the observer's eye, the diamond will appear green. This is the cause of color in many naturally green diamonds.

Crystal lattice deformation

Diamonds form and spend millions of years in the deep Earth environment where they are exposed to extreme temperatures and pressures. Some diamonds also spend part of their history in areas of Earth's interior that are subjected to the lateral forces of plate tectonics.

Although diamond is an extremely durable material, the forces of Earth's interior can cause the carbon atoms in a diamond's crystal lattice to slip slightly out of alignment. This movement usually occurs across surfaces within the diamond known as "glide planes" (in the gemological literature these features are also called "slip planes" or "lamellae").

These glide planes are not "fractures". They are planes within the diamond along which a tiny shift of the carbon atoms has taken place - without damaging the structural integrity of the diamond. However, the glide planes do alter the way that light passes through the diamond crystal. They selectively absorb some wavelengths (colors) of light passing through the diamond and selectively transmit other wavelengths (colors).

When glide planes are observed through a microscope, a small amount of color can often be perceived (see the accompanying photo). Some diamonds have multiple parallel glide planes, and that can increase the intensity of the diamond's color. The color patterns and slight relief produced by the glide planes often have an appearance similar to wood grain. For that reason, some gemologists use the term "graining" when referring to these features. Most graining displays as brown in color, and in very rare instances, as pink or red.

Occasionally the graining is strong enough to be visible with the unaided eye. When visible at 10x magnification or less, the graining can be considered a clarity characteristic. Graining visible in diamond at 10x magnification can influence both the bodycolor of the gem and its clarity grade.

The Argyle mine in Australia is the best-known mine in the world for producing diamonds colored by graining defects. About 80% of the diamonds produced at the mine are brown in color. Argyle is also the world's most important source of diamonds with a pink or red natural color. The mine usually produces a few hundred carats of pink diamonds per year. However, in an entire decade the mine will produce only a few dozen carats of diamonds with a pure red hue.

Mineral inclusions

Black color in diamonds can be caused by a high density of inclusions - so many inclusions that they interfere with the passage of light. The inclusions in black diamonds are usually opaque minerals such as graphite, hematite, or pyrite. When the inclusions have a very small particle size and are uniformly distributed, they can render the diamond opaque, with a handsome black color and a highly reflective surface. Some black diamonds obtain their color from small surface-reaching fractures that have been graphitized.

The name "white diamonds" is often used in reference to transparent diamonds on GIA's D-to-Z color grading scale. That usage is common, but it is not precise.

The name "white diamonds" is best used for diamonds with a white body color. White diamonds often contain dense clouds of very fine-grained transparent to translucent mineral inclusions that interfere with the passage of light through the diamond. These inclusions can cause the diamond to have a white translucent color, and if they are slightly reflective they can produce an opalescent "glow" within the gem. These diamonds have a truly white body color and are considered to be "colored diamonds" or "fancy white" diamonds if the quality of their white color merits these designations.

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Mineral Inclusions

Mineral inclusions.

White diamonds are one of the most distinctive stones in the family of fancy color diamonds. Due to their one-of-a-kind pattern and shades, these stones have been gaining popularity over the last few years.

What are white diamonds?

As mentioned, since natural diamonds form under extreme heat and pressure deep within the earth and their growth takes between one to three billion years. Only rare diamonds emerge in flawless condition.

Most of them are imperfect and contain different types of inclusions, which affect a diamond's appearance, internal structure, clarity grade and price as a result. While some diamonds are less included than others, there are heavily included stones, informally called white diamonds.

The term "white diamonds" that are heavily included with large and visible white and/or black crystals, giving them a silky and speckled appearance.

Black inclusions are usually caused by carbon deposits, often in the form of graphite and make the diamond look darker. White inclusions are caused by various flaws in the diamond's crystal structure, such as nitrogen and other impurities, that make a diamond look cloudier and hazier.

It is worth mentioning that white diamonds are fairly environment-friendly compared to flawless diamonds. The reason for this is that it takes less mining to find white diamonds than clear diamonds.

While both colorless diamonds and white diamonds are formed the same way. they differ when it comes to evaluating their quality characteristics.

Standard diamonds are graded on color, clarity, cut and carat weight; however, white diamonds are not graded and come without certification.

In general, diamonds are rarely perfect. Most of them have some level of flaws. However, in white diamonds, inclusions are a distinctive feature that gives their unique look and different sort of value that is not broken down into the diamond clarity scale.

The color of a white diamond depends on the number and type of white and black inclusions. There is an unlimited array of white diamonds, varying from nearly clear with few marks to creamy, cloudy grey, stormy, marbled and almost black stones. The more included the diamond, the darker it looks.

White diamonds cut & carat weight

While colorless diamonds are cut to maximize their brilliance and sparkle, white diamonds are cut to bring out their unique inclusions and patterns.

The sparkle in white diamonds is heavily reduced because of the high number of inclusions, which is why diamond cutters often choose fancy cuts such as hexagon, kite, coffin, triangle and others for these stones. Rough or raw white diamonds are other popular options, usually used in custom-made bohemian settings.

Since white diamonds are more common than high clarity stones, they are more affordable than traditional colorless diamonds, meaning they are easy to find in larger sizes at a good price.

Are white diamons durable?

Regardless of their fancy look, white diamonds rank 10 on the Mohs hardness scale like regular diamonds. However, because of the high number of inclusions, white diamonds can be more fragile and prone to chipping than regular ones.

In simple words, inclusions can compromise the structural integrity of the stone. However, if the diamond is treated with proper care, it will last for generations. This also means that it is not recommended to clean white diamonds in ultrasonic cleaners as ultrasound vibrations can affect the internal flaws and crack the stone.

Colored Diamond Treatments

The guide above is concerned with the causes of natural color in diamonds. However, a large and growing number of treatments are being used to modify the color of diamonds. These treatments can be divided into two groups:

  1. Surface treatments that modify the apparent color of the diamond.

  2. Crystal lattice modifications that change the way that light travels through the diamond.

Surface treatments

Surface Treatments involve applying a substance to the surface of a diamond that alters the color of light that travels through the diamond, or, applying a substance to the surface of a diamond that alters the color of light that is reflected from the surface of a diamond.

Some of the earliest and simplest treatments involved applying ink or paint to the culet, pavilion, or girdle of a diamond. The application of a colored material to these surfaces of a diamond can cause that color to be reflected through the diamond, changing the apparent color of the diamond when it is viewed in the face-up position. These changes are not permanent, but if they are applied to surfaces that are protected by a setting that prevents abrasion or removal, they can persist for a long time.

Another type of treatment involves applying metal oxide coatings to the surface of a diamond. These colored coatings reflected color from the surface of the diamond and reflect color through the interior of the diamond. The coating, instead of the diamond, is responsible for the color of light that reaches the eye of the observer. Examples are: SiO2 coatings doped with gold to produce pink color; SiO2 coatings doped with silver to produce blue or yellow color; and Fe2O3 coatings to produce orange color. These treatments are not permanent but can produce a vivid apparent color.

Crystal lattice modifications

Crystal Lattice Modifications are done using irradiation, high-temperature / high-pressure annealing, low-pressure / high-temperature annealing, and combinations of treatments applied in different sequences. These treatments produce the same types of defects found in natural diamonds that have been exposed to a similar history of conditions within the Earth. The results of these treatments vary and can be dependent upon the characteristics of the original diamond.

Modification of a diamond's color by any type of treatment can be a legitimate business practice if that treatment is fully disclosed to, and understood by, people who purchase the diamond. Any special care requirements must also be disclosed at the same time. Diamonds with a color produced by treatment should be sold for lower prices than similar-color diamonds with a color of natural origin.

Many buyers gladly purchase diamonds that have treatment-produced color and enjoy their significantly lower prices. At the same time, many buyers strongly dislike gems that have been treated because they are only interested in diamonds with natural color. These buyers insist upon full disclosure of any treatments and are willing to pay a premium price for natural-color diamonds.

Color In Lab-Grown Diamonds

Many of the earliest lab-grown diamonds were yellow in color. Earth's near-surface atmosphere is 78% nitrogen, and keeping nitrogen out of the growing process was extremely difficult. Eventually this problem was solved, and now growers have almost complete control over the diamond-growing process. They have many options for modifying diamond color using post-growth treatments.

As grown - color

Today, lab-grown diamonds with an intentional or "as grown" color are common products in the gem and jewellery industry. These diamonds are grown in environments that introduce color-causing atoms or other defects into the diamond while the crystal lattice is developing.

Post-growth - treatments

Lab-grown diamonds are also subjected to "post-growth" treatments to modify their colors. Treatments include: irradiation, high-temperature / high-pressure annealing, low-pressure / high-temperature annealing, and combinations of treatments applied in different sequences. These lab-grown colored diamonds are sold in a spectrum of colors and sell for prices that are significantly less than mined diamonds with natural color - sometimes less than 1% of the cost of a similar-quality diamond with a natural color.

Lab-grown diamonds give people who are unable to afford (or who prefer not to pay) the high cost of a natural diamond with natural color an opportunity to obtain a similar-looking piece of jewellery at a much lower cost.

Final Thoughts

Going through our guide above you are left with a limited yet wide range of possibilities that are left to your judgment.

However, whether it is better to buy a 3.00 carat Intense Yellow diamond VS2 with no fluorescence or a 0.50 carat Fancy Blue it is up to you. No one knows now which has better chances to appreciate more in few years and which will be easier to sell. But, as long as you follow our recommendations which are based on our experience, your decision will be an educated one.