Diamonds: One of the safest and most secure investments today


Who says that you can’t have it all? With inflations and volatile market, the diamond remains as the handiest, yet most secure investment which increases its value over time!

Experts say that if you want to make sure that your money is safe and that it will continue to provide you with a high return of investment, you have to put your money equally in three safe investment vehicles:

  • Real estate
  • Fixed-interest security
  • Movable assets: A good example of this type of investment is diamonds. 

Why? If you lose in one of the aforementioned vehicles, one investment will still shore up and protect your money. Compared to other types of investment vehicles, diamonds carry the following significant advantages:

Promising price performance

Finance experts believe that diamond prices may increase by 6 percent every year until 2020 due to the rising demands of diamonds in India and China. While the demands continue to rise, the supply remains tight. There are no new diamond mines discoveries’ that can match the consistent demand growth. If consumers will constantly vie for this scarce gem, diamond prices will continue to increase.Take note that the latest diamond mine was found in 2003, when Diavik Mine was discovered. After that, no other mine that can produce and meet the expanding diamond demands has been discovered. In 2011, China became the second largest diamond consumer in the world after the United States, taking the place of Japan which used to be on the second spot. There was also an increasing demand of about 17 percent in India. At present, India and China are expected to be the 31 billion dollar market of diamonds in 2016 as predicted by the Anglo American PLC.

Inflation buffer

The value of diamonds is not affected by inflation. Your money may decrease in value as the exchange rate fluctuates over time; the market may collapse and demands for certain commodities may also decline. Currency reforms may deplete your dollar account or totally smash your stocks. But diamonds- with all its beauty and splendor will remain valuable through time. It has an inherent value which is not altered by the economy. It is true that the demands for diamonds may go up or fall depending on the current market trend and economic situations. But, diamonds remain as an investment of the rich and wise investors who are patient enough to wait for its price to go up again.

Bankruptcy proof

If you go bankrupt, diamonds may not be one of the properties up for grabs depending on your State laws.
Exemptions are usually extended for jewelries and other personal items which do not exceed beyond the specified value. 

Internationally accepted currency

If you forgot to convert your cash into the currency of the country you’re visiting, you can use your diamonds for a significant transaction or purchase. Diamonds are exchangeable worldwide and the value remains the same in all parts of the world.

Confidentiality

Any type of brick and mortar business requires lots of paper work for you to get started. You have to register your business and make sure that you update it every now and then. Failure to do so puts you at risk with the proper authorities. You may also have to pay certain employees to keep the business rolling. As you get on with your business, your name will also become very popular in that business circle. You lose your privacy and everyone can ask about your investments and how you go about with your day to day course of activities. But, you don’t have to go through that fuss with diamonds. No registration is required and you can keep it as long as you want. Although you may have to pay taxes on your jewelry depending on the rules of your State, the hassles are nothing compared to other types of investments which require registration. 

Tax-free unrealized capital gains

If diamond prices go up, your diamond’s value go up as well. But, unlike other possessions which you have to tax on every value gain, you can enjoy tax free value increase on your diamonds. So, as long as you keep it and don’t put it up for sale, you don’t have to pay taxes on their value gains. Meaning- if your diamond increased in value but you don’t sell it-it is still an unrealized capital gain and you don’t have to pay taxes even if it’s selling price goes up. However, if you sell it, you are obliged to pay for capital gains tax or the tax you have to pay on realized gain, or sold asset. The revenue system will only tax you on diamonds that you sold and got paid for. 

Zero maintenance cost

Buy a car and you have to maintain it every now and then. Invest in real estate and you have to pay for its maintenance cost, otherwise your roofing will leak, walls may collapse and roof may bar down. Almost every real and personal asset needs to be maintained for it to retain its value. Since diamond is the hardest gem that ever existed, only a diamond can damage it. Simply keep it in its original box, or in a specialized box designed for your diamonds or even in a pouch made of soft fabric. You can clean up your diamonds with affordable cleaning products like a liquid detergent with warm running water or warm water with ¼ part of ammonia. You can also avail of professional cleaning services which will use ultrasonic cleaners to remove any impurity on your diamonds and maintain its luster.

Independent pricing

The prices of diamonds do not depend on any governmental law or international regulation. Diamonds keep their values in spite of the economic state. And yes, even in times of recession diamond prices can still go up!

Diamond investments compared with Real Estate and Fixed-Interest Securities 

Diamonds are movable assets or commodities which have the dual character of a tangible property used for personal purposes and an investment vehicle. On the other hand, real estate and Fixed-Interest Securities are investment tools that can gain stable returns and reasonable risks.  Here’s a short discussion of the three investment vehicles, their benefits and risks. 

Real estate

Real can be a great investment in many cases. It has been proven to be a good source of steady income and long-term appreciation. Real estate has two types-residential and commercial.Most of the real estate investors make money by home flipping, or buying a distressed property. They are renovating it and selling it in a higher price. Or, they rent out a property to get a steady income.In most cases, a real estate investor need pay to a 20 percent down payment on a real estate property and put the rest to financing. It allows them to invest in several properties with lower down payment while they build their income out of the profits from the property. This is called ‘leverage’. It is important to mention that when you invest in real estate you must know how to manage your properties, in order to get good returns on the investment, otherwise, leveraging may cause you to spend more than what the property can earn.
As to risk:
Real estate is an illiquid asset which you cannot put up for sale immediately. Oftentimes, you have to maintain your real estate for several years before you can sell it for a higher value. You may also have to face the risk of property bubbles and other real estate pricing fluctuations, when housing prices can go critically low. So, if you only borrowed the money you used to purchase the real property and the housing market crashes, you may have to sell it for an amount which is lower than your mortgage. 
Fixed-Interest Securities
A fixed-interest security refers to a debt instrument that an investor uses to loan money to an entity in order to get interest payments. Fixed-interest securities pay a particular interest rate during the lifetime of an instrument. The investor receives back the face value of the security upon its maturity.
Examples of fixed-interest securities:
  • Gilt-edged bond
  • Debenture
  • Bond

As to risk:

They are less risky compared to equities because bondholders are usually prioritized during the liquidation of company assets compared to the company’s shareholders. But unlike shareholders, bondholders may not get back their principal investment because they are unsecured creditors. A fixed-income security faces the risk of interest rate. If the interest rate goes up, the security becomes less valuable because the interest rate is fixed. If the interest rate drops, the security also increases in value. 
Diamonds:
Movable or personal property can either be a tangible or intangible. Diamonds and other jewels are considered as intangible properties.

If you are looking for a safe investment, diamonds could be an appealing venture. The demands for diamonds continue to flourish on several countries.It is one of the most in demand materials used in industrial processing because of its hardness and heat conductivity. You can find it in high-tech applications (like computers and laboratory lasers) and in all other drills and equipment which are diamond-based.Aside from the industrial status of diamond, you can also benefit from its luxurious status. Diamond has always been a sign of luxury and you can pass it to the next generation with the expectation that it can bring a good amount of fortune to its possessor.

You can also augment your financial portfolio by investing in diamond-operating firms like Zale and BHP Billiton.

Diamond market derivatives 
Top banks have been pushing for the creation of diamond market derivatives for five years now. Its advocates are hopeful that this new market will be realized to hedge the risk of inflation and to make profits out of a promising diamond demand. If a derivative market will exist for diamonds, the diamond forerunners can make exchange-traded instruments and lock the prices to protect the diamond market against price increases. The major supporters of the diamond market derivatives are companies in China and India because of the rising demand for diamonds in these two countries. At present, you can invest in diamond market through the publicly traded stocks of mining companies.

Another way is to buy investment worthy Diamonds – Larger high quality white and unique and rare fancy color diamonds. Ideally you would hold them for a few years and wait for market increase.The best way to buy an investment diamond would be either from a Major auction house or a company that specializes in investment diamonds, not from a “regular store” where prices are much higher.Just to prove the point, rarecoloreddiamonds.com reports that 1-carat Fancy yellow internally flawless diamond with Radiant cut, and IF clarity cost $15,000 per carat in 2008, and increased to $18,000 per carat in 2012, and $19,120 per carat  in 2013. This year, 1-carat Fancy yellow internally flawless  diamond with Radiant cut, and IF clarity  costs $20,327 and is expected to cost you $22,954 per carat  by 2016. 

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