As a financial commodity, it seems that perhaps diamonds are set to be the new gold. Diminishing stocks and high demand sees prices rising and investors from a number of countries are moving their cash from traditional stocks to these naturally occurring gemstones.
If you’ve been thinking about where to place some of your funds and don’t know about the diamond market, here’s a guide to the basics of how to buy or become involved.
The rising value of bling
In the first decade of the 21st century, three carat diamonds rose in value by 145% and five carat gems by 171%. Colored diamonds have either held their value or risen with the increase in popularity over the last couple of years depending on the rarity of their color. In November 2015, a world record was set when a Hong Kong tycoon spent an incredible $48.5 million for a 12.02 carat blue diamond which he gave to his 7 year old daughter as a gift alongside a 16.08 carat bright pink diamond which cost a princely $28.5 million – also for his daughter, Josephine.
How to invest in diamonds
Whilst diamond trading is still largely unregulated with prices for gems often invited by sealed bids, those new to investing in this market can take three routes:
- Investing directly in actual diamonds
- Investing in diamond funds
- Purchasing shares in diamond mining companies
Owning your own diamonds
Holding actual diamonds such as those seen in wedding rings from Whiteflash, buyers will know that owning diamonds means they can be set into jewelry and enjoyed. Most experts agree that the minimum investment period for a diamond should be at least five years to begin to see a return.
Only buy diamonds from trusted sources and ensure they always have the grading report from one of the industry standard organizations such as the GIA as it will include the value of the stone. If you decide to buy diamonds, take steps to ensure they are safely stored if not used in a piece of jewelry and remember to inform your home insurer if they are kept at your property.
Invest in a fund
There are only a few specialist diamond funds to choose from so do your research before opting for one. The first aspect to check out is the minimum investment as it will usually be at least a few thousand.
Diamonds are certainly creating more and more interest on the stock market and since 2006, diamonds have globally outperformed the FTSE100 by approximately nine to one. This is due to the shift in buying and selling of diamonds by emerging nations such as China and India.
You can also become involved in diamond investment through an actively managed commodities fund. They are usually more heavily weighted towards action in gold, oil or copper but could well give you the exposure you are looking for.
Mining companies
The third option is to invest in the companies which are the first step in the chain; the diamond mines themselves. It’s a less expensive route but can be more precarious than the other options as you are putting your money into businesses rather than the actual items they produce. Take advice from an expert if you know little about the diamond mining industry before buying any stocks.