Investing in Diamonds
Successful marketing and hype have led diamonds to be a status symbol - a token of marriage or romance - something that a woman must receive from a man. Diamonds are actually so precious that they are one of the most promising investments a person can make.
Diamonds
Around 130,000,000 (or 26,000 kg) diamonds are mined annually, which amounts to $9 billion. Roughly 10,000 kg of diamonds are synthesized every year.
About 49% of diamonds come from Central and South Africa, but they can also be found in India, Brazil, Australia, Canada, and Russia. Gem quality diamonds can be seen in South Africa, Botswana, Australia, Congo, Russia, Namibia, and Angola. They are evaluated, cut, and sold mostly in primary diamond processing centers in India, Antwerp, China, Thailand, Johannesburg, Tel Aviv, London, Amsterdam, and New York. After they are cut and polished, they are sold to diamond jewelry manufacturers or wholesalers in one of the 28 registered diamond bourses (exchanges) around the world. The members of the World Federation of Diamond Bourses (WFDB) serve as middlemen for wholesale diamond exchange, dealing with polished or rough diamonds. After purchase, retailers or wholesalers prepare the diamonds for final sale to the consumer either as jewelry or as a raw gem.
Dubai is the regional distribution center for the Middle East while New York, which is considered the largest market for diamonds in the world, is the point of entry to the United States. In just one day, sales can reach up to $400 million in the Diamond District in New York, which consists of 2,600 diamond shops.
More than 50% of rough, polished, and industrial diamonds pass through Antwerp, which has an annual turnover of $39 billion. Antwerp is the world's diamond capital, although there are also large hubs in India.
A few hundred million women wear diamonds, while some keep them in safes or safety deposit boxes. A translucent diamond without color is considered the purest.
Diamonds are not just precious gems for jewelry, though. They have many industrial uses, too, such as polishing and cutting other materials. They are also used in the production of computer processors and microchips.
History of the Diamond Industry
Historians say that the diamond trade started more than 1,000 years ago. Diamonds were abundant in India well before they were discovered in other parts of the world. By the 16th century, the business shifted to Amsterdam and Antwerp. In the 18th century, it moved to Brazil and South Africa.
Cost
The price of diamonds depends on the four C's: cut, color, carat, and clarity. Cut is deemed to be the most important because that's what a diamond's brilliance depends on. Unlike precious metals, there is no universal price per gram for diamonds. It's cheaper to produce synthetic diamonds than to mine them.
According to the Rapaport Diamond Report, a 4.09 carat or 98 mg stone may cost $5,500 per carat or more; whereas a half carat or 100 mg stone with the same quality may cost $7,500. This means that stones that are rarer, such as green, blue, pink, and yellow diamonds, cost more. This color rarity has been a proven and effective investment for the past five years. From 1990 to 2011, the value of three-carat diamonds rose by 146%, while five-carat diamonds increased by 171%.
Recycled diamonds are diamonds that have been used as jewelry, recut, and resold and have the same value as unrecycled diamonds as long as they are the same size. Pricing also depends on fashion, consumer expectations, and marketing.
A Long-Term Investment
A study showed that 62% of engaged couples in China buy a diamond wedding ring. With the rising demand of diamonds in China and the supposed decline in the quality and number of gems mined from countries like Russia and Canada, diamonds are viewed as a favorable investment today and will gain value in the years to come.
Based on experience, the price of jewels escalates with inflation. They are said to have more value than houses or cars because they last for such a long time. While the prices of other commodities like silver, gold, copper, rubber, and grains all change due to the economy, diamonds have remained stable; in fact, their value grew every year after the Depression. Investors started buying diamonds in the late 70s in anticipation of a recession, currency reforms, market collapse, and inflation.
Diamonds are regarded as luxury goods, not commodities. Therefore, they are not difficult to sell, just like high-end bags, shoes, watches, and cosmetics. Although diamond production is small compared to other mined materials, diamonds are more profitable. Another advantage is that there is no need for registration, no maintenance cost, and no tax on value gains. Along with gold, diamonds are the only internationally recognized alternative currency and keep the same value globally. Unlike real estate, diamonds don't lose their value. Unlike stocks, diamond prices are stable and compensation for them is better.
Returns
According to a study, white diamonds had annual real returns of 6.4% between 1999 and 2010, which increased to 10% between 2003 and 2010. This is higher compared to global stocks, which had an annual return of -0.1%, while global bonds had a return of 3.3% from 1999 to 2010.
How to Invest
Aside from buying actual diamonds, you can opt to invest in an exchange traded fund, stock of an individual diamond mining company, or in a mutual fund that capitalizes directly on mining companies or in the diamond market. You can spend as little as $1,000. With this type of investment, there are wider fluctuations than in the actual market price.
If you choose to own tangible diamonds, you have to have at least $5,000 and wait at least five years before you can sell them, giving you the option to wear them in the meantime. Advisors say that the best way to buy diamonds is through a diamond trader. Jewelers may charge you double the wholesale price unless you are adept in this business. It's a good idea to monitor the prices of diamonds on the market by visiting diamond retailer sites online, through diamond consulting companies, through financial reports of mining companies, or through auction houses.
When trading with mining companies, be sure to choose an established one.
More Tips to Remember
€ When buying diamond jewelry, choose something that you will enjoy wearing but not so attractive that it might catch the eye of thieves. Buy from a reputable company.
€ Consider your returns by buying something at close to the price that you could resell it for. Look at it from a long-term perspective. Although the prices could fluctuate on a daily basis, investing in it as a long-term business has positive assurances based on practice.
€ When purchasing a diamond, ask for documentation of its cut and clarity, including carat, weight, and grade. Sellers also have to provide you a report of any imperfections in each stone. If not, you can have them graded by the Gemological Institute of America (GIA) and investigated for possible substandard quality. Grading can cost you $50 to $1,000.
€ Get an insurance policy to protect your stones from possible damage or theft.
€ Buying diamonds at retail and selling at wholesale is not a good idea.
€ Rare diamonds are harder to sell unless you are a billionaire, so go for medium quality diamonds. Round, brilliant cut diamonds are the most resellable in the long run.
€ Purchase stones in classic shapes to avoid them going out of fashion.
€ Store your diamonds in a secure and safe place.
The Future of Diamonds
Mining precious jewels such as diamonds is a booming industry, which creates employment opportunities. With four mining sites, the high quality supply of diamonds in Canada is expected to soar in the next 18 y
Diamonds
Around 130,000,000 (or 26,000 kg) diamonds are mined annually, which amounts to $9 billion. Roughly 10,000 kg of diamonds are synthesized every year.
About 49% of diamonds come from Central and South Africa, but they can also be found in India, Brazil, Australia, Canada, and Russia. Gem quality diamonds can be seen in South Africa, Botswana, Australia, Congo, Russia, Namibia, and Angola. They are evaluated, cut, and sold mostly in primary diamond processing centers in India, Antwerp, China, Thailand, Johannesburg, Tel Aviv, London, Amsterdam, and New York. After they are cut and polished, they are sold to diamond jewelry manufacturers or wholesalers in one of the 28 registered diamond bourses (exchanges) around the world. The members of the World Federation of Diamond Bourses (WFDB) serve as middlemen for wholesale diamond exchange, dealing with polished or rough diamonds. After purchase, retailers or wholesalers prepare the diamonds for final sale to the consumer either as jewelry or as a raw gem.
Dubai is the regional distribution center for the Middle East while New York, which is considered the largest market for diamonds in the world, is the point of entry to the United States. In just one day, sales can reach up to $400 million in the Diamond District in New York, which consists of 2,600 diamond shops.
More than 50% of rough, polished, and industrial diamonds pass through Antwerp, which has an annual turnover of $39 billion. Antwerp is the world's diamond capital, although there are also large hubs in India.
A few hundred million women wear diamonds, while some keep them in safes or safety deposit boxes. A translucent diamond without color is considered the purest.
Diamonds are not just precious gems for jewelry, though. They have many industrial uses, too, such as polishing and cutting other materials. They are also used in the production of computer processors and microchips.
History of the Diamond Industry
Historians say that the diamond trade started more than 1,000 years ago. Diamonds were abundant in India well before they were discovered in other parts of the world. By the 16th century, the business shifted to Amsterdam and Antwerp. In the 18th century, it moved to Brazil and South Africa.
Cost
The price of diamonds depends on the four C's: cut, color, carat, and clarity. Cut is deemed to be the most important because that's what a diamond's brilliance depends on. Unlike precious metals, there is no universal price per gram for diamonds. It's cheaper to produce synthetic diamonds than to mine them.
According to the Rapaport Diamond Report, a 4.09 carat or 98 mg stone may cost $5,500 per carat or more; whereas a half carat or 100 mg stone with the same quality may cost $7,500. This means that stones that are rarer, such as green, blue, pink, and yellow diamonds, cost more. This color rarity has been a proven and effective investment for the past five years. From 1990 to 2011, the value of three-carat diamonds rose by 146%, while five-carat diamonds increased by 171%.
Recycled diamonds are diamonds that have been used as jewelry, recut, and resold and have the same value as unrecycled diamonds as long as they are the same size. Pricing also depends on fashion, consumer expectations, and marketing.
A Long-Term Investment
A study showed that 62% of engaged couples in China buy a diamond wedding ring. With the rising demand of diamonds in China and the supposed decline in the quality and number of gems mined from countries like Russia and Canada, diamonds are viewed as a favorable investment today and will gain value in the years to come.
Based on experience, the price of jewels escalates with inflation. They are said to have more value than houses or cars because they last for such a long time. While the prices of other commodities like silver, gold, copper, rubber, and grains all change due to the economy, diamonds have remained stable; in fact, their value grew every year after the Depression. Investors started buying diamonds in the late 70s in anticipation of a recession, currency reforms, market collapse, and inflation.
Diamonds are regarded as luxury goods, not commodities. Therefore, they are not difficult to sell, just like high-end bags, shoes, watches, and cosmetics. Although diamond production is small compared to other mined materials, diamonds are more profitable. Another advantage is that there is no need for registration, no maintenance cost, and no tax on value gains. Along with gold, diamonds are the only internationally recognized alternative currency and keep the same value globally. Unlike real estate, diamonds don't lose their value. Unlike stocks, diamond prices are stable and compensation for them is better.
Returns
According to a study, white diamonds had annual real returns of 6.4% between 1999 and 2010, which increased to 10% between 2003 and 2010. This is higher compared to global stocks, which had an annual return of -0.1%, while global bonds had a return of 3.3% from 1999 to 2010.
How to Invest
Aside from buying actual diamonds, you can opt to invest in an exchange traded fund, stock of an individual diamond mining company, or in a mutual fund that capitalizes directly on mining companies or in the diamond market. You can spend as little as $1,000. With this type of investment, there are wider fluctuations than in the actual market price.
If you choose to own tangible diamonds, you have to have at least $5,000 and wait at least five years before you can sell them, giving you the option to wear them in the meantime. Advisors say that the best way to buy diamonds is through a diamond trader. Jewelers may charge you double the wholesale price unless you are adept in this business. It's a good idea to monitor the prices of diamonds on the market by visiting diamond retailer sites online, through diamond consulting companies, through financial reports of mining companies, or through auction houses.
When trading with mining companies, be sure to choose an established one.
More Tips to Remember
€ When buying diamond jewelry, choose something that you will enjoy wearing but not so attractive that it might catch the eye of thieves. Buy from a reputable company.
€ Consider your returns by buying something at close to the price that you could resell it for. Look at it from a long-term perspective. Although the prices could fluctuate on a daily basis, investing in it as a long-term business has positive assurances based on practice.
€ When purchasing a diamond, ask for documentation of its cut and clarity, including carat, weight, and grade. Sellers also have to provide you a report of any imperfections in each stone. If not, you can have them graded by the Gemological Institute of America (GIA) and investigated for possible substandard quality. Grading can cost you $50 to $1,000.
€ Get an insurance policy to protect your stones from possible damage or theft.
€ Buying diamonds at retail and selling at wholesale is not a good idea.
€ Rare diamonds are harder to sell unless you are a billionaire, so go for medium quality diamonds. Round, brilliant cut diamonds are the most resellable in the long run.
€ Purchase stones in classic shapes to avoid them going out of fashion.
€ Store your diamonds in a secure and safe place.
The Future of Diamonds
Mining precious jewels such as diamonds is a booming industry, which creates employment opportunities. With four mining sites, the high quality supply of diamonds in Canada is expected to soar in the next 18 y
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