The global economy has had many ups and downs since 2008, and mostly downs. We find ourselves now in 2020 and beyond in even more uncertain times. People more than ever are looking for ways to protect their money.
Just having money in the bank or stocks is not safe. Banks can and have collapsed as the stock market can collapse. It is better to hold physical commodities like gold in your hand.
Over the last several years there has been an increasing interest in investing in diamonds. People are catching on to the fact that the price of diamonds reliably increases overtime. Diamonds are seen as an investment opportunity, both by individuals and the professional investment community.
5 Reasons to Invest in diamonds
#1: One of the safest possible investment purchases
Diamonds offer price stability in a period of economic decline. They may lose a little of their value during a world crisis, but generally, they provide protection against deflation and market collapses. In rough times, investors are more likely to liquidate assets that are more easily replaceable than diamonds. So, it's unlikely that there will suddenly be a large supply of diamonds on the market.
#2 The price of diamonds reliably increases overtime
As mentioned previously, you can expect your diamonds to grow in value. This has been shown historically that a diamond’s value appreciates over time. To help ensure that it does hold its value, make sure it’s professionally certified by the Gemological Institute of America (GIA).
Diamonds are the hardest substance on earth. They are very durable and can indeed last forever. This makes them a good investment as an heirloom to be passed down from generation to generation. Because of the durable/unbreakable nature of diamonds, they don’t lose their value over time.
#4 Portability of Diamonds
Diamonds are a very small concentration of wealth. You can maintain physical possession and take them with you anywhere you want to go. Consider this - 1 oz of diamonds equals 45 pounds of gold. At today’s price of gold that would let you carry $87,300 in almost your pocket! Also, because they are small, you don't need extensive or expensive storage, just a small safe will suffice.
#5 Rarity of Diamonds
The fact that diamonds are rare and the demand keeps increasing year after year, also makes them a good investment. Most diamond mines nowadays are known, and they are closed at the end of their productive lives. Some big ones have closed recently. So, in time diamonds will become even rarer, as any natural resource can. This affects the long-term increase in the value of diamonds.
Diamond jewelry or loose diamonds?
There are two ways to invest in diamonds – one is buying diamond jewelry like an engagement ring, and the other is purchasing investment-grade diamonds as loose gems.
This and the physical nature of diamonds makes investing in diamonds a bit more complicated than some other investment options. It is not as straightforward as investing in things like the stock market.
When looking for reasons to invest in diamonds, first, let's look at the definition of investment and what it means to invest money in something.
“An investment, or to invest, is to put money to use by purchase or expenditure in something offering potential profitable returns as an interest income or appreciation in value.”
Where do diamonds fit in this definition? And is it different when you're purchasing something like an engagement ring or if you're purchasing a diamond as a store of value for the future?
Diamond rings or diamond jewelry can be a good investment, as with other physical commodities, it tends to increase in price over time, regardless of the state of the economy. But there is a difference between diamond jewelry purchases and investment-grade diamonds purchased as loose gems.
If you are buying a diamond ring, for example, you are most likely purchasing that from a jeweler, not a wholesale loose diamond. The ring bought from a jeweler will have large markup. So, if you are going to sell it, most likely you won’t get the full value.
Should I invest in diamonds?
Is diamond jewelry a good investment for the future? A second question is, if you want to diversify your assets and buy diamonds to put away as a store of value for the future, are loose diamonds a good investment?
The difference between engagement ring purchases and investment diamonds is that investment diamonds purchased as loose gems are not a “fungible” commodity.
What this means is that unlike gold or silver, every diamond is unique, with differences in carats, cuts, and clarities. Because it’s unique, it’s difficult to standardize for the purpose of being traded on an exchange. It is not an investment like a stock certificate, where every piece of paper is the same.
If you do buy diamond jewelry, you should buy a “pretty” diamond, which means a diamond that measures what a diamond of its weight should measure. One that is brilliant and the inclusions are pleasing.
Now is that pretty diamond an investment? That diamond will retain a certain amount of value for the future, but that does not mean that you can turn around tomorrow and sell it for a profit.
It can be better when you buy loose investment diamonds as a long-term investment. Historically over time, these have appreciated in value. If you buy one that's worth the money, then you should be able to find a buyer willing to pay for that diamond and make a profit, when given time.
Also, note that it is better if you don’t put all your eggs into one basket. Diamonds should be part of a broader investment portfolio which shares other alternatives. This helps lower the risks you are taking because every investment is affected by different factors.
It's also important to be well prepared. familiarize yourself with diamonds and research the terminology regarding investing in diamonds. You yourself should be able to make a realistic assessment of the possible risks and gains.