What is a Diamond?
Diamond is the most sought-after, naturally occurring carbon mineral. Each carbon atom is covalently bonded to four neighboring carbon atoms that are organized in a crystal format called diamond cubic. This makes it the hardest-known gem with adamantine luster. Diamond has the value 10 on Moh’s scale for its hardness. Most people perceived that diamonds are mined from coal. That’s not true. Diamonds form under high temperature and pressure in the earth’s mantle. Volcanic eruptions deliver the diamond-bearing mantle, called Xenoliths, to the earth’s surface without melting. Thus, people mine the diamonds from the Xenolith-bearing rocks.
Diamonds are found in alluvial gravels, glacial tills, and kimberlite pipes. The kimberlite is formed by the intrusion of magma from mantle into the earth’s crust.
Last generations considered a solid block of pure yellow gold a valuable asset. But diamonds are a good part of the investment portfolio nowadays. They offer good returns with low-interest rates. There’s a popular phrase about diamonds, “Diamonds are forever”. This speaks of their intrinsic luster, value, and demand.
Some jewels like gold are available in solid blocks and every block has a universal weight and price. Diamonds are valued for their unique properties. The value increases when fine metals transform it into jewels.
Why People Invest in Diamonds?
Diamonds are not only a piece of ornament to add to your collection, you can also count on diamonds as your assets/stocks. The market is always in flames for rare and valuable commodities. This makes diamond a good choice for investment.
An increased interest in diamond investment during recent years is because more investors becoming cognizant of the increase in the price of diamonds. With the collapse of the markets, high prices attract people to finance diamonds.
Diamonds are a good commodity of value. They do not need expensive care to preserve their value, even if you don’t pay any attention to them. Yet, people maintain their value. If you buy and hold on, it is almost certain that it will be worth more when you will barter it.
To invest in Diamond, you’ve to be a Diamond Specialist
To gauge the value of the diamond, jewelry specialists use the grading technique, formulated by the Gemological Institute of America (GIA) in the 1950s. It stresses four important factors to assess the quality of diamonds:
- Carat Weight
These are known as the 4Cs. Diamonds can be forged into a category of patterns and still be attractive. Diamonds are weighed in carats where 1carat = 200 milligrams. Diamonds vary in color and clarity from colorless to black, transparent or translucent. Colorless, transparent, or pale blue diamond appeals most. However, they are available in many fancy colors like red, blue, green, yellow, violet etc. the color can be altered by radiation or heat treatments. Properly cut diamond with high refraction gives great brilliance to the gemstone.
Benefits of Investing in Diamonds
You need to spend some time learning the secrets to market trends before getting started. Meanwhile, you understand and recognize the benefits of real commodities. High-interest rates of other commodities make diamonds much more desirable for long-term investments.
The justification is very noticeable and creates lots of sense:
- Diamonds don’t need compartment:
Unlike gold bullions, it can be either stored in a safe or you can wear it. One can effortlessly keep a one million dollar diamond trinket in one’s favorite ring or a necklace.Compared to other monetary items such a small item can be worth millions of dollars in cash, and that’s amazing.
- A diamond is solid – It doesn’t smash or wear off:
As the hardest, naturally durable material on the earth, you do not have to worry about anything happening to it. If studded in jewelry, what you have to do is to make sure you do not lose it! Other things to care for include;
- Type of Metal: Diamonds make a great pair with White, Yellow, or rose gold, and Platinum. A perfect setting would bring out its luster and increase its value.
- Colored or Colorless Diamonds: An ideal cut colorless diamond is more valuable than a colored one. However, since 2005, the market is also warm for colored diamonds because of their rarity.
- Quality of Diamonds: Validate the quality of the diamonds by verifying a GIA or GSI lab certification at the vendor’s shop.
- Good Setting of the Diamond
Not everyone can imagine how a diamond looks when improved. A good and smart setting can very much be a tremendous tool that will help you trade the diamond. Good settings can focus the color and hide inclusions. And let’s not ignore that when improved, you can enjoy it while you have it.
- Financial Benefits
Besides, there are also financial benefits in buying diamonds for investment objectives. It is true for most real stocks. Gold, silver, and diamonds are usually appreciated in observation of inflation. Unlike the others, diamonds are more reliable. To ensure monetary profit, invest in colored diamonds or metal-diamonds (jewelry) as well. This would add a variety to your collection and cash. Analyzing the market trends, you can easily cash your diamonds when prices inflate.
- Liquid Shape of Currency
Diamonds are useful in inflation periods as a liquid currency. They preserve their value over time. Most people have shifted to diamond investments as they are more comfortable against inflation compared to stocks and bonds.
The pressure for diamonds has been building up, while supplies have been declining. With more people buying diamonds than ever before and the stocks of suppliers going below, it is expected that prices will continue to improve.
The Risks associated with Diamond Investment
Investing in Diamond can be a good thing, but it has its pros and cons. One of the major issues is price transparency. When you buy gold, you can easily look up the price index and buy gold bullion. But diamonds, the pricing is not set. The diamond is valued by its individual properties and market demand.
Another issue is that diamonds are not as runny as other investment options. Turning the investment into cash is not an easy task. The resale value of diamonds depends on various factors and does not differ like the Gold rate. Typically, expect to resell your diamond at 25% to 50% lower than the price you bought it.
While investing in anything, the norms ‘Buy low, sell high’ will fulfill you well. With diamonds, however, ‘buying low’ is difficult than it looks. The tax (20%), and the retailer mark-up can vary from shop to shop. The setting of the diamond also increases the value of the gemstone. Diamonds are a commodity and like other commodities, their value can fluctuate based on market performance, so it’s crucial to make sure that you’re buying from a reputable retailer at the most comfortable price.
When investing in Diamonds;
Investing in diamonds is more complicated than conventional investment i.e. Gold, silver, and the market are known for its lack of transparency.
Set a budget
Keep in mind that this should be a part of your portfolio. True, unlike commodities, the preliminary amount that is expected is a bit higher, but this is no reason to go over the fund or over the quota of your portfolio you had in mind.
Don’t put all the eggs in one basket.
Quoting Warren Buffett, “Diversification is protection against ignorance,”
In diamond investment, it may be reasonable to amend your “portfolio”. If you had set your diamond investment budget at $25,000 then you should consider splitting it between two or more diamonds.
Choose the right diamond
Always buy a certified diamond from a reputable retailer. This is the most common mistake people regret when investing in diamonds. A GIA or GSI laboratory certified diamond would have high chances of a profitable resale than the worthless shop or brand certificate.
The diamond shape is also worth considering while choosing. Round brilliant diamonds are in fashion these days. Hence, there’s a market appeal for the buying and selling of these diamonds. Also, go for colored varieties of diamonds. The market in China is dominant for the rare colored diamonds.
Don’t expect a quick turnover
If you’re planning to invest in diamond jewelry and cashing it back in the next 6 months, you’re going to lose the 20% of your investment promptly that you paid as tax. Diamond’s values fluctuate like any commodity, and they don’t offer short-term revenues. Hold on to your asset until it pays off for the tax value and the markup prices. Cherish and flaunt it in a perfect setting with white or rose gold until it is prime time for a resale. Invest in diamonds only if you’re comfortable with your money locked up for years.
Some raise the question of why diamonds are not yet traded on a stock exchange.
Well, the answer is quite simple; Diamonds are as inimitable as your fingerprint. Each diamond has its unique characteristics, and as a result, there are no two diamonds exactly alike.
Diamond Investment Prospects for 2021
Like any commodity, the prices of diamonds fluctuate between highs and lows. However, the drift is small compared to other metals. In 2008, due to market collapse, the prices hit the record-low of about 12%. According to diamond Miner Corporation, De Beer’s report, over the last 8-10 years, diamond prices inflated at a rate of 33% making it approximately 3.2% per year in May 2020. And it was expected to bloom to 6% by the end of the year. The market shares of the company have now dropped to 30% from 90%. This indicates the high demand for the very gemstone.
Diamonds are a Good Investment or Not
As with all other investment choices out there, the perception, awareness, and knowledge of how things work are significant and compulsory. Diamonds are more complicated and the habitat on investment has been long uncharted.
Possessing the right diamond is the key to a good investment. Also, many experts consider investing in diamonds as locking up the money. But if you invest in a high-quality certified diamond at a wholesale price; you can enjoy the investment as perfectly set diamond jewelry until it is ready to pay off.
While recent statistics show an improvement in diamond values, there is no sure-fire way of defining how your investments will come out. If you have the thrill of risk-taking, and you have a tandem thousand dollars that you won’t be forfeiting anytime quickly, try your hand at diamond investments today.