Investment gurus always impart the importance of investing in as many diverse tools as possible. Diamonds are a great way to diverse your portfolio, as these can help during hyperinflation, international financial crisis or in times of dire need. Here are answers to the most frequently asked questions about investing in the diamond market.
What parameters must be considered while dooing an investment in diamonds?
Popularity: Diamonds sell usually based on current popularity of trends. Thus while a hearts and arrows diamond may have good popularity now, trends may change after five years, when you want to use your investment. Also, today many multi millionaire diamond buyers choose rare and large diamonds, demand for which is on the rise. Put your money on a stone that indicates good popularity over time and will thus ensure you a better sale price when time comes.
The Diamond 4C's:Cut, color, carat and clarity greatly affect the prices of diamonds. There is a smaller amount of people who buy diamonds of the highest quality. This is because customers are often unwilling to pay high prices for ideal diamonds, as their naked eye often discerns little difference in beauty from other diamonds. Also diamonds with qualities of D and E color, and IF and WS clarity grades has shown a very high price rise in the last few years. History has indicated that diamonds with qualities of F, G, H, I in color and VS1, VS2, SI1, and SI2 in clarity have also shown an increase in prices paid by dealers since 1986.
Certification: Buyers today are aware of certification and prefer buying a stone certified by a top of the line laboratory like GIA or AGS. While buying a diamond for investment purpose, ensure that it is certified by a renowned laboratory and remember to compare diamond prices only between diamonds graded by the same diamond grading laboratory.
What are the advantages of investing in diamonds?
Popularity: Diamonds have been highly popular through time. International demand for diamonds is on the rise due to increase in number of high net worth individuals in Asia, Russia and the Middle East. As principles of economics indicate, higher the demand, higher is the rates of increase in prices.
Portability: Diamonds have high value for a small size as compared to other items of jewelry. This portability makes diamonds an excellent concentrated tool for providing money to those displaced by war and other natural calamities. It can also be carried upon oneself at all times in the form of jewelry for further protection of your valuable assets.
Durability: Diamonds are highly durable and do not undergo wear and tear like other jewelry items. There is hardly any erosion or loss over time.(just like any asset it is very important to take care of the diamonds you own thus storing them in an appropriate place).
Natural and rare: Approximately 130 million carats of diamonds are mined annually and the numbers have been growing through the years. However diamonds are natural resources. This makes them a commodity with limited supply. As scarce supply drives demand, diamonds would should go up in value over time.
Personal property: What makes diamond most personal is that it offers benefits of complete ownership and financial privacy. Low profile can be maintained about it, if the owner so decides.
Independent values: Values are not linked directly to stock and bond markets. Fluctuations in the latter will not affect the value of diamonds in a direct manner.
History of prices: History reveals that the prices of diamonds have steadily gone up over the years. Prices have risen at an average of 15% every year since 1949. Over the past 30 years, value of colored diamonds as also doubled in every six to seven years.
Disadvantages of investing in diamonds
Low salability: While it is easy to purchase a diamond, it is often very difficult to sell one. Also there are no established markets where customers can sell diamonds. High sentiments regarding purchase of a stone, usually for weddings or engagements, also makes selling diamonds rather difficult. Only when diamonds are purchased from established merchants, it is easy to sell them in the market.
Threat of new technologies: Technologies are evolving by the day and investors in diamonds always face the threat of low cost high quality diamonds entering the market. If technologies can make better synthetic diamonds possible, the market for diamonds may go down, making the tool an undependable one for long term investments
Threat of new sources: Future discoveries of new diamond sources can also bring down diamond prices. As supply increases in the market, prices can decline at any time.
Price of diamonds: There are no fixed prices for diamonds. The price of these gems often depends on various parameters like cut, color, clarity, carat and shape. As there is no universal set price per gram it becomes difficult to sell diamonds. Many experts also express the view that the market prices of diamonds are high mainly because of a turbulent economic market and are not the actual diamond prices. Thus, there may not be a long term speculative demand for diamonds.
High initial investment: If you are serious about diamond investments, do not overlook that this requires large amount of capital and a great tolerance for risk.
What do analysts say?
As with any other funding, experts have diverse opinions about diamond investments. However here are some views by popular figures of the diamond market.
Diamond analyst James Allan once revealed that the demand for diamonds will grow by 10% by 2015. As the demand for high quality diamonds will increase, purchasing them now could prove to be a good investment.
Martin Rapaport says that decline in the value of dollar, currency used in pricing diamonds have increased investment values in diamonds. This has made diamonds suitable as hedge against inflation.
How to invest in diamonds
Diamond investing usually involves the following process.
Gather as much information as you can on diamonds. Learn about the 4Cs and the diverse aspects that make a stone desirable and profitable.
Plan on the amount of funds you want to invest on this tool. You can avail consultation from financial advisors.
You could next consult a gemologist, diamond dealer or jeweler to help you choose the right selection of stones. These could range in quality and quantity, depending upon your budget and choice. You also need to decide between loose diamonds and diamonds set in jewelry.
Hold your investment till it appreciates in value. Once you feel that the market is right contact diamond dealers or online selling sites to advertise your stone. You can also approach a jeweler directly.
Alternative modes of diamond investment
Buying shares in diamond mining companies is another viable option for diamond investments. Alternative investment markets (AIM) are listed online to provide you information on diamond companies with whom you can invest.
With a rise in the number of people investing in the diamond market, the first publicly listed fund investing company for rare white and colored diamonds was also launched in June 2008. This closed end fund would invest in the high quality segment of physically polished diamond market.
Diamonds are suitable vehicles of investment; however buyers must be careful that they invest in the right diamond. Given the proper grading and required certification, customers can ensure that the stones they buy not only last a lifetime but also reap rich dividends when time comes.
Important notice: Gemisimo Ltd. does not recommend investment in diamonds. Every purchase of a diamond must be thought out carefully and professional consultation is essential! Gemisimo Ltd. is not responsible in any matter to losses or profits made directly and indirectly from purchasing a diamond.
