Investment – Why invest in diamonds?
Diamonds have long been valued for their beauty and aesthetics, but do they hold long-term value for the average buyer? Is it worth investing in diamonds? Prized diamond investments tend to stand head and shoulders above the rest in terms of colour, clarity, and carat weight. Diamonds weighing between 5 and 20 carats, as well as rare coloured varieties, have historically been able to hold their value well over time due to scarcity.
The diamond industry, like any other, was impacted by the global financial crisis in 2008. According to the 2013 Global Diamond Report by Bain & Co., diamond prices dropped significantly during this period, yet they rebounded swiftly to reach historic highs in 2010 and 2011. Prices have now levelled out, and consumer demand for diamonds remains high particularly in global markets such as China, the USA, and India. Between 1990 and 2011, three-carat diamonds increased in value by 145% on the Rapaport Diamond Trade Index. Five-carat diamonds enjoyed similar growth during this time and increased in value by more than 170%.
Why Invest in Diamonds?
Diamond investment can be tricky for the novice. Minute variables in quality, colour, or tint can have a drastic impact on market value. As with any investment worth making, the potential benefits often outweigh any perceived risks:
- Diamonds are a physical asset. A diamond is unlikely to be damaged or broken when stored and insured correctly, making it safer in a sense than fine wine, art, or property. They will almost certainly outlast the initial buyer, making them a family asset that can be passed down for generations.
- Diamonds require very little maintenance. Unlike real estate investments, you won’t have to pay for continual upkeep and taxes. Anyone can purchase and own a diamond, with no need for prior certification or declaration.
- People have been fascinated by diamonds for millennia, and the trend of using diamonds in engagement rings shows no sign of slowing. In fact, in growing economies such as China this trend is growing rapidly. The price of diamonds is expected to continue increasing due to the simple laws of supply and demand. With rising populations and engagement ring buying trends, there are no market signs that diamonds will lose their popularity in the near future.
- The act of investing in diamonds can be looked at as a more secure option than more volatile investments like stocks and shares. No matter what the economy is doing, a diamond is unlikely to lose its value. Diamonds have long been status symbols for the rich and famous, and arguably regarded with even more gravity in times of economic downturn.
As with any economical decision, diamonds cannot be guaranteed to be utterly risk-free, yet the current market climate suggests that they may be the closest thing to a guaranteed investment. With a steady demand due to the engagement ring market, diamonds are an all but recession-proof option for your investments.