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Are Diamonds a Safe Investment?

 

 

Are Diamonds a Safe Investment?

 

Gold has gained popularity in the past ten years with the markets seeing prices that are five times higher than those seen in at the turn of the millennium. While prices are still much higher than they were ten years ago, the recent slide in the gold market has many people wondering if diamonds are a safe investment. Safe, when it comes to investing, is a relative term, and it really is dependent on an investor’s risk tolerance. A person with a high risk tolerance may consider a particular investment safe while another investor with a much lower risk tolerance may consider that very same investment as too risky. When discussing a loose diamond investment the same things can be said regarding a safe investment.

A comparison can be done to a degree of risk when considering whether diamonds are a safe investment or not. As the market currently sits, diamonds are indeed a safer investment than some other types of investments and for a person are attempting to diversify their investment portfolio, a loose diamond investment is a pretty good compliment.


Economics of Investing

When evaluating any investment, it is vital to look at the supply channels to determine the long term viability of the investment. This process works for every type of investment including investments in diamonds. When doing research on the available supply of diamonds, it will not take long for any person to realize that supply is in favor of investments. Recent reports are expecting an increase in supply by only about three percent over the next 17 years. This low growth rate comes from the maturity of many of the large diamond producing mines around the world. While new mines are being discovered, it can take a long time to get a loose diamond mine up and running. This, coupled with the decline of mature mines, decreases the supply of diamonds and drives up the price.

Opposite of supply is the demand of the product. The loose diamond demand is only increasing. A report from the first quarter of 2013 expects that demand for diamonds will grow by six percent between now and 2020. The United States is still responsible for a large demand in the market, but the fastest growth in demand is actually coming from China. This demand is only in its infant stages, and as the economy of China continues to grow, the middle class in China grows with it. The middle class is often the driving force for increases in demand and growth in any country, and China is no different.

 



Benefits to Diamond Investing for Any Size Investor

There are many reasons that people choose to invest in loose diamonds. The strong point for diamonds over other types of investments is that diamonds provide more than just an investment. One of the biggest reasons that people turn to diamonds for investments is that they have an aesthetic value that other investments lack. This is often the same reason that people turn to gold when investing.

Diamonds are something that can be enjoyed while maintaining an investment value. Diamond jewelry is a popular way to invest in diamonds. While there is a lot of information on the raw diamond market, these investments are often limited to large scale investors. Anyone can invest in diamond jewelry and as the supply decreases and demand increases, that jewelry gains value.

The ease of transport is another reason that many people turn to diamonds for investment. They can be moved and transferred easily between parties and locations. While diamonds are not often used as a form of currency, they are an option when it comes to trading investments. For these reasons, investors both large and small, find loose diamonds to be a great choice.



It’s Time to Invest

To invest in loose diamonds does not mean that a person should purchase any and all loose diamonds that they see. In fact, this is a terrible way to invest because not all diamonds are created equal. To maximize the investment, the investor needs to focus on obtaining just the highest quality loose diamonds. In addition to this, a person should also focus on purchasing only the bigger carat diamonds. At a minimum, this means purchasing at least two carat diamonds, but many investors look to purchase at least four to five carat diamonds. Larger diamonds are going to hold value better over the long term. These are the diamonds that are rarer, and as diamonds are divided, they lose value unequally. Four single carat diamonds do not usually equate to the value of the four carat diamond because of the rarity component.

Just as the type of diamond being purchased matters, so does where it is purchased from. A person should not just purchase diamonds from anyone. It is always much safer to purchase from an authorized trader of loose diamonds as there are a lot of dangerous investments out there. There are always sellers that want to take advantage of diamond investors, and inexperienced investors are a perfect target.

An investor also has to keep any eye out for synthetic or lab loose diamonds. These diamonds are created in a lab and not by nature, which makes them worth much less, but can be hard to spot. Most licensed traders make it very obvious whether a diamond is the real thing or whether it is synthetic. It is the individual diamond sellers that a buyer has to be careful doing business with. It can be easy for an investor to purchase a diamond that is overstated in value or synthetic so dealing with a reputable dealer is a must.

When it comes to investing in loose diamonds, there are many benefits. They are transportable, aesthetically desirable, having an increasing demand and decreasing supply. Diamonds are often compared to gold, and with the changes in the gold market over the past ten years,  many people are looking to other investment options like diamonds and the diamond market appears to have serious potential for the future of investments.




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