Historically, diamonds have served as a way to preserve wealth and pass it along to future generations. The idea of using diamonds not just as wealth preservation, but also as a tool for wealth expansion is relatively new. The topic of diamond investment is a controversial one. You can find numerous articles both for and against diamond investment. At the end of the day, it is up to each individual investor to decide what works best for them. In order to have a better understanding of the concept of investment in diamonds, it is necessary to see the full picture, which includes its strengths and weaknesses.
Strengths: The 4Ps
The four Cs of diamond grading is widely recognized and are known facts, but we doubt many of you have heard of the 4Ps of diamond investment. The 4Ps of diamond investment are Portability, Privacy, Price Performance, and Preservation of Wealth. While not all the benefits of diamond investment are covered by the 4Ps, they do represent its main qualities.
One undeniable advantage of diamonds is their size to value ratio. Diamonds have the most concentrated value out of all natural resources and other assets. Several millions of dollars can be the size of one small fancy colored stone. No other asset can stand up to diamonds in that respect. The outcome of a diamond’s relatively small size is that diamonds are extremely portable, one of their greatest advantages. As a result of their extremely concentrated value and portability, diamonds qualify as the best emergency funding. They can be easily transported from any location to any location. All of your wealth can fit in your pocket, become a piece of exquisite jewelry or be stored in a deposit box anywhere in the world.
The privacy involved with diamond investment is another aspect that can be very attractive to certain investors. Diamonds provide a completely private investment for the owner because they do not require any form of registration or licensing, as many other assets do. There are no government records or any other government intrusions connected to diamond ownership. These factors, in addition to their small size, make diamonds easily concealable “from the all-seeing eye.”
Diamonds have shown impressive price appreciation throughout history, and even more so in recent years. The rarity of natural colored diamonds, the decreasing supply and substantially increasing demand of colored stones cause prices to soar at an unprecedented rate. The potential for colored diamonds investment is phenomenal. For example, fancy intense pinks have shown more than 400% appreciation in less than ten years. How much the price of an individual colored diamond will appreciate is largely based on the rarity and color of the stone. Certain colored diamonds appreciate faster than the others.
It requires deep market knowledge to understand the factors behind the price performance of certain stones and knowing which stones should have higher investment potential than others.
Preservation of Wealth
With the current turmoil of financial markets, wealth preservation can become a more important aspect of investment than high returns. In a world where currencies default, markets crash and “bubbles” burst, to be able to preserve your wealth might become the number one priority. Your wealth preservation is guaranteed because of the aforementioned advantages of diamond investment. Diamonds have never fallen out of favor; they keep their value, and help to preserve it for the future generations. Diamonds are tangible assets that are largely not influenced by any economic or political changes in the world. The hardest mineral on earth is here to help you keep your wealth undivided and to pass it on.
Weaknesses of Diamond Investment
It is true that diamonds compared to other assets have lower liquidity. They are not as liquid as stocks that are bought and sold in seconds or as gold that has a spot market and is sold at the given price worldwide. Diamonds are much more complex and it requires expert knowledge to liquidate them without undesired losses. Liquidity of an asset is very important for the investment consideration.
Diamonds are characterized as having low liquidity and lack fungibility. An asset’s level of fungibility is determined by its ability to be interchanged with other assets of the same type, which makes the trading and exchange process quicker and easier. Since all diamonds are unique, it’s hard to exchange one for another. There are no identical diamonds existing in the world. Even if two diamonds are matched to have the same value, the stones themselves are individual and sustain their own unique characteristics.
When the goal of an investment is making quick cash, it is important to look at liquidity. Diamonds are suitable for a long-term investment, but the question of liquidating might still arise in the future. As the diamond market expands, the liquidating options also widen. Diamonds can be sold through diamond trading companies, different online trading platforms and through auctions. Explore liquidation options with Asteria.
Requires Expert Guidance
Diamonds are not homogenous like gold is; there are more than 1600 categories of diamonds. Extensive knowledge is required to understand diamonds, and make smart investment choices concerning them. Having a trustworthy and reliable expert is a must. Professional diamond experts will be able to properly assess your investment choices and find you the most suitable stones. Only individuals with vast experience in colored diamonds should be trusted to make the right choices concerning colored diamond investment. Only when your purchase is evaluated by a trustworthy expert can you rest assured that you made a wise investment choice.
Unlike other investment alternatives, diamonds don’t yield any regular income. You most probably will only receive high returns on your investment when you keep your purchased stone for some period of time before selling it for a higher price. While you have the actual physical stone and your potential profits might be increasing, you can only see the value of the investment realized after liquidating your investment.
After getting to know the strengths and weaknesses of this new and exciting endeavor, you can make a more well-informed investment choice. Judging by the special considerations involved with diamond investment, it is suitable for those individuals who are looking for new ways to diversify their portfolio; those who want to add a more stable, tangible asset to their capital, those who try to find a way to preserve their wealth in any situation.