Fancy colored diamonds are hot, no doubt about it. Do a Google search for "fancy colored diamonds" and almost 1 million search results pop up.

In December 2012 at auction, a rare 3.15 carat reddish-orange diamond sold for $2,098,500, setting a new record for the auction of a reddish-orange colored diamond, and a new per-carat record price of $666,200.

And leading up to Valentine's Day this past February, television commercials sparkled with fancy colored diamond ads.

Not only have fancy diamonds grown in popularity over the past three decades, they've also consistently gone up in value. Many people have made sound investments in them because of their ability to show great returns with less volatility than other types of investments.

One of the reasons why they have increased in value so much is the lure they have for being unique, one-of-a-kind pieces of jewelry.

What affects the price of a fancy colored diamond?

The four main factors that determine a fancy colored Diamant value are hue, color saturation, color purity, and availability. The diamond's color, including intensity of color, and hues are considered the diamond's most important qualities.

The rarer a diamond is in color, the more valuable it will be. And if the color is richly saturated, the diamond will also be more valuable. Like white diamonds, a colored diamond's clarity or purity of the color will also increase its value.

Unlike white diamonds, inclusions can be desirable in fancy colored diamonds. Inclusions are technically flaws, but in them, they can create unique tones and beautiful flashes of color.

What fancy color diamonds are most valuable?

Pink diamonds are one of the most in-demand colors, and have shown impressive investment performance over the years. Fancy intense pink diamonds have increased more than most.

In 2003, a 3.58 carat fancy intense pink pear shaped diamond sold for $115,000 per carat. Just seven years later in 2010, a 4.59 carat fancy intense pink diamond was sold for an amazing $625,000 per carat - that's a 443 percent increase!

Blue diamonds are also very popular, and have shown a marked increase in value over the years. In 2002, a 2.18 carat fancy intense blue, emerald-shaped diamond sold for $180,000 per carat. Nine years later in 2011, a 2.28 carat fancy intense blue, marquise-shaped diamond traded at $400,000 per carat - a 122 percent increase!

Compare fancy colored diamonds with other investments

While there may be occasional price fluctuations caused by economic and other factors, the price of them has shown to hold more value and to be less volatile than other investments, including other valuable gemstones.

By comparison, gold has been bullish over the last 10 years - up almost 500 percent from 2001 - but gold has also made price corrections of up to 30 percent during that time. Comparatively, they have made much smaller corrections over the last 10 to 20 years. Since 2002, they Amethyst have shown annual increases of 10 to 35 percent.

With the supply of them limited, growing interest from the market, and the inherent uniqueness of each stone, fancy diamonds should stay on an upward course for years to come.

This article is for general information purposes. Talk to your financial advisor before making any investment decisions.

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