Diamonds as an investment
"Diamonds are a girl's best friend", Marilyn Monroe once sang. But are the precious stones also good as an investment? We shed light on possible pitfalls. The central banks' zero interest rate policy is fuelling many investors' fears of rising inflation rates. No wonder that tangible assets like real estate are experiencing a boom. But also rather exotic possibilities of investing money have recently come into focus - like diamonds. However, before you put your money into the sparkling stones, it is worth taking a closer look at the advantages and disadvantages.
How crisis-proof are diamonds and what are their advantages?
Diamonds are coveted as pieces of jewellery and are rare by nature. This means that they basically have two important prerequisites for maintaining value and a possible increase in value. However, this also applies to precious metals in exness-sg.com/metatrader4/. What diamonds have over precious metals is their extreme compactness. One carat corresponds to only 0.2 grams. A stone with just a few carats can be worth half a million euros - and fit in your pocket. This is considered an advantage in crisis scenarios: the pieces can be easily hidden and transported.
Synthetic diamonds pose a potential problem in terms of long-term scarcity. These can already be distinguished from real stones only by experts. Will specimens from the laboratory develop into serious competition in the future with negative effects on prices? According to a report by Bain & Company, this depends primarily on the preferences of the clientele.
What are the disadvantages and risks of investing in diamonds?
One of the biggest difficulties in investing in diamonds is determining their value. Gold bars, for example, have a fixed gold content, which makes it easy to determine the value by weight. With diamonds, the whole thing is much more complicated. They also differ in terms of quality and shape. The internationally valid "4 Cs" are decisive for the price: carat (weight), clarity, colour and cut. The fifth "C" is a certificate, if available. Due to the uniqueness of the stones, there is no trading on regular exchanges, but only on special diamond exchanges. The best known are in Antwerp, Tel Aviv and New York.
The Diamond Index of IDEX, the International Diamond Exchange, can serve as an indication of the current value. It consists of 15 different typical investment diamonds. However, it takes specialist know-how to deduce the fair value of any stone from these reference prices.
A look at the index shows that diamonds are definitely subject to price fluctuations. The steady price increase sometimes cited as a selling point is a myth: In the last five years, a collection consisting of the reference diamonds of the index would even have fallen slightly in value. Diamond investments thus have a clearly speculative character, also because they yield neither dividends nor interest. Moreover, the trading margin between buying and selling prices can be relatively large. And value-added tax is added on top.
Conclusion:
Diamonds are extremely compact, highly mobile and cannot be multiplied at will.
For these reasons, they are basically suitable as protection against crises and inflation.
The non-transparent price formation and price fluctuations pose clear risks.
Ideally, investment diamonds have a certificate from a renowned institute.