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How to invest in diamonds? part 1

How to invest in diamonds and do not lose? 

Diamond is synonymous with success and luxury, a good that everyone wants. It is also an interesting investment.

History shows that investment diamonds have been steadily rising for decades, and the return on investment in developed market economy countries has always surpassed inflation.

Diamonds therefore seem to be a very interesting alternative for securing assets, which has been available to everyone since recently. What is the uniqueness and specificity of the diamond that it has become the target of investors?

What rate of return can we count on when investing in diamonds? What is the expected time horizon of such an investment? How to choose the best stone in order to be able to make profit relatively easy?

What are the reasons for the fact that diamond is a good investment?

Looking at the three criteria for optimising investment: profit, risk and ease of diamond removal in the time horizon brings a satisfactory and fairly high profit with minimal risk. The question of speed of decommissioning remains debatable to this day.

Of course, this is not an extremely liquid security, but you can't compare a diamond to a property in a specific location, which is extremely hard to sell. Diamond trading takes place globally, investment diamonds certified by independent and recognized gemmological laboratories will be recognized everywhere in the world. There are companies that guarantee the redemption of stone, which is also a sure safeguard in case of the need to make a sudden profit.

Investment in diamonds

The investment in diamonds yielded a relatively high profit in the future, with little or no risk. History shows that the prices of individual groups of these stones in highly developed countries rose steadily above inflation in the boom periods, while prices in the boom periods were rising, reflecting the flow of capital from conventional investment tools to alternative methods.

The fact that diamonds are not entirely susceptible to speculation is due to two main factors:

There are no two identical diamonds in the world. They occur in nature in a multitude of colours, their degree and distribution of "contaminants"is different. The quality of the sanding and the right proportions have a significant impact on their price.

As a result, investment diamonds are not standardised and, to date, there are no speculative investment tools based on the price of the diamond index, despite repeated attempts to create them. Of course, there are standardised diamonds price reports around the world, such as the most important of them is the Rapaport Diamond Report, but the trade in diamonds is only physical.

It is a strictly regulated market. The global mining market is in the hands of De Beers corporation in 40 to 50% of the world market, currently there are movements indicating the formation of a new player on the diamond market - Russia. Still, however, it is still a theatre of a few actors who are not very keen on falling prices of this unique jewel.

The diamond cannot be applauded in terms of the profit generated in recent years, as similar increases in stones of certain groups will remain unprecedented. Experience shows that the historical results of any investment method do not provide similar results in the future. The same applies to diamonds and their price over time. However, it should be remembered that this growth is as stable as possible, which makes the investment in diamonds a very safe method of capital investment.

Diamonds are a highly concentrated and at the same time very discreet wealth. A 6.5 mm diameter stone in diameters (1 ct) with defined parameters in diameters of approx. 3 to 20 thousand euros. A stone with a diameter of 11 mm (5 ct) is worth approx. EUR 60 to 200 000. Such a jewel is very mobile - easy to transport and hide.

Its unique physical properties make this mineral very resistant to external factors. Diamond trade is not officially registered - it can only be purchased on the receipt. These are further arguments for the fact that diamond is a good investment.

Investing in diamonds.... the other side of a medal....

There are, of course, opponents of investing in diamonds. Their counter-arguments include in particular:

Low liquidity of the investment - it is not easy to sell a large diamond because of its high price despite an attractive "virtual profit".

Difficulties in valuing extremely rare groups of stones. Some diamonds are so unusual (especially in terms of colour) that their valuation is impossible.

The risk of purchasing a diamond that is not a real diamond or a stone with hidden imperfections. Synthetic diamonds already exist with very similar parameters, but at a much lower price, as well as a whole range of methods to hide their imperfections.

Risk of purchase of stone at a price higher than the market price (vendor's fraud).

The argument that diamonds, however, are not a sensible alternative to investing capital is very reasonable, but rather a little exaggerated. As with other alternative investment methods, a certain amount of knowledge must also be demonstrated here in order to plan the investment sensibly and not to be upset. Education in this direction is necessary to turn the apparent disadvantages of a diamond investment into its advantages and to avoid traps of this very exclusive form of multiplying savings.


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