Diamond Investing Part One
Diamond Investing has a lot to do with the price of diamonds and can be a profitable business. Take all the diamond dealers around the world. Each one is making a profit by investing in diamonds.
However for the ordinary person diamond investing has some draw backs Firstly to be a diamond dealer takes a lot of expertise, experience and knowledge as well as the ability to break into the diamond dealers market.
In addition there is the well embedded perception, first introduced by DeBeers marketing and then buoyed up and continued by the various diamond markets around that, “Diamonds are forever.” i.e. one does not resell ones diamonds but keeps them forever. This has reduced the secondary market, that market in which one buys and sells diamonds, to a tight enclosed predominantly diamond dealers market.
Consequently, for the ordinary person to buy and sell a diamond, there is little if any profit in doing so, in fact one is much more likely to make a loss.
Having said that, there are ways in which one can turn a profit by investing in diamonds, if one is smart and is prepared to do some homework and also understand that diamonds, like any other investment, always carry risk.
There are two basic ways to invest in diamonds.
Buy to keep and buy to sell again.
There are also other factors to take into account.
What diamonds to buy. Does one make a hard investment or a soft investment? Hard means buying real physical diamonds you can hold in your hand. Soft means investing in companies that mine or deal in diamonds.
If buying hard diamonds, what factors need to be taken into consideration? The same for soft.
Taking these in turn. Buying diamonds to sell or keep would depend to some degree upon your reasons and investment strategy. What is the reason for investing in diamonds. To save or conserve assets or to turn a quick or medium profit?
Long term the value of diamonds will depend largely upon two things,. The hoarding of diamonds by such companies such as De Beers or Argyle Diamonds (the two biggest producers in the world currently) and the supply of diamonds from the ground. In fact more deposits are being found so there is little likelihood of their being a world wide short supply due to mining. Only recently Canada, which is relatively untapped have began to show some interesting deposits.
So as regards the price of diamonds, the shorter term value of diamonds does not change very much. Currently the value seems to raise buy around 5 percent a year. Not a large return in investment terms. And the draw back to buying diamonds from dealers is that you will pay retail and they do not buy back at retail but usually around 30 percent under wholesale which can be 50 percent of the retail.
End of Part 1