When you are looking for a great way to diversify your investment portfolio, investing in diamonds may be a unique option to consider. While most investors think mostly about investing in stocks, bonds, CDs, mutual funds or real estate, investing in diamonds is another very lucrative option. As is the case with any type of investment, it is necessary to learn more about diamonds before investing heavily in them.
Why Invest in Diamonds
Diamonds are one of the most coveted and popular gemstones in the world. For centuries, they have been used in everything from watches and jewelry to certain types of equipment and more.
This gemstone is naturally made over many years of geological activity. This means that there is a very small supply of diamonds in the world. With demand high, and likely to go higher, and with a limited amount, the price of diamonds over the years may continue to increase.
Some people hold onto very rare and expensive types of diamonds, such as blue diamonds, for a long period of time. Others purchase large quantities of smaller diamonds to trade on a regular basis, and they sell these items quickly to turn a profit.
With multiple strategies to consider when investing in diamonds, this may be a great opportunity for you regardless of the current state of your investment portfolio or your objectives. Some investors especially invest in diamonds because they can easily be passed to heirs after their passing.
What Diamonds to Invest In
If you have never invested in diamonds or gemstones in the past, it is important to develop a sound strategy up-front. So, do this to bolster profitability while minimizing your exposure to risk.
Take time to learn more about the demand for and the factors that affect the price of diamonds. Many people who are investing in diamonds for the first time may consider buying multiple diamonds with a round cut that are between one and one and a half carats.
This is a popular diamond type and size that is frequently in trade. Additionally, this means that there is usually a considerable amount of demand available when you decide to sell the product.
Note that the demand for diamonds greater than two carats as well as the demand for expensive colored diamonds has a limit. However, the profit margin may be much greater.
Furthermore, white diamonds are more common and are therefore more affordable. These may be a great initial color to choose when investing in diamonds.
If you are thinking about investing in diamonds, it is important to understand how diamond value works. Everything from color and clarity to the size or weight and more can affect the value of a diamond.
If you are thinking about investing in one or more diamonds with a value of more than $1,000 each, it is wise to look for diamonds that are certified.
The only recognized certifications are from GIA and AGS, and they attest to the overall quality of the diamond. Essentially, they affirm the qualities of the diamonds that can determine value.
When investing in diamonds, you should consider the cost of the diamond carefully. The primary places to purchase diamonds from as an investment are from a retailer or from a wholesale supplier.
As you might imagine, a retailer marks up the cost of diamonds to generate a profit. Their profit eats away at your own ability to profit significantly from an investment.
You want to focus on the quality of the diamond you are purchasing as well as the ability to re-sell it. You also should focus on the overall value that you are getting a great sales price.
The weight class determines diamond prices, and the value per unit can vary depending which class the diamond is in. For example, the difference in cost between a .49-carat and a .50-carat diamond is lesser than the difference between a .99-carat and a 1.0-carat diamond.
This is because a different weight class starts at the 1.0-carat level. This drives the cost of the larger diamond upward. There are multiple weight thresholds that you should learn about before you invest in diamonds.
Are Diamonds a Good Investment?
Before investing in diamonds over other possibilities, you need to review the pros and cons associated with this option. Many investors have a significant portion of their portfolios dedicated to diamond investments because of their appeal and value.
However, the reality is that there are some downsides when it comes to diamond investing as well. When you learn more about the benefits and drawbacks associated with this type of investment, you can better determine how to structure your portfolio.
Diamonds are a hot commodity with a limited available supply. This means that increasing demand will likely continue to put upward pressure on the price. While there are no guarantees regarding a return on most investments, chances are that the price of diamonds will increase over time.
Diamonds are a physical asset that you can easily hold, transport, secure or sell as desired.
You maynot need an intermediate or broker to sell diamonds to an interested buyer.
Diamond investments may be a great way to hedge your portfolio against the negative effects of inflation.
Diamonds can easily be lost or stolen, and the value may be erased from your portfolio. Insurance is available on some jewelry, but it comes with a cost. The price of diamonds is somewhat arbitrary or vague because it depends on the emotions of consumers.
It can take a lot of time and effort to learn about the quality of diamonds. As well as to establish great industry connections so that you can profit fully and easily from diamonds.
More expensive or rare diamonds may have fewer buyers and may be more difficult to liquidate quickly. This is not a liquid asset, and it can take time to find a buyer for any price point.
Diamonds are a great investment to consider when you want to add a luxurious status symbol to your portfolio that can increase in value over the years. However, there are some downsides to consider as well before you invest in these gemstones. Savvy investors will make only very small investments of diamonds initially until they learn the ropes. Even if you are a knowledgeable diamond investor, it is wise to diversify your portfolio with other types of assets. You should do this in order to mitigate risk and maximize your return on investment. This may include other types of gemstones and precious metals as well as stocks, bonds, CDs and other asset classes.