Diamonds are truly a girl’s best friend, but they can also be a smart investment for anyone. These precious gems have withstood the test of time, retaining their value and desirability for hundreds of years. While other assets may fluctuate unpredictably over short periods, diamond have proven remarkably stable over the long run. For those seeking a hard asset that holds its worth, diamonds deserve serious consideration. The following six compelling reasons explain why diamonds may be one of the soundest investment choices for building wealth and hedging against financial instability.
1. Rarity and Demand
Diamonds are rare gems that take extreme heat and pressure underground to form. Their scarcity and beauty drive strong, consistent demand. Only a small percentage of the world’s diamond mines produce gem-quality stones. As the world’s population and wealth grow, demand for diamonds is projected to rise steadily. This limited supply and growing demand help maintain diamond prices over the long run.
2. Tangible Asset
Unlike investing in stocks, bonds or cryptocurrency, diamonds are a tangible asset you can see and touch. You actually hold the physical stones in your hand. Some see diamonds as a store of value, similar to gold or other precious metals. If times get tough financially, you have the option to sell your diamonds for cash. With other investments, you only hold an ownership interest in a company or project.
3. Inflation Hedge
Over decades, diamonds have retained their purchasing power even as currencies have lost value due to inflation. Their high value per small size makes diamonds easy to transport, trade and sell anywhere in the world. No matter what economic conditions arise, people will always treasure diamonds for important occasions like weddings and anniversaries. So diamonds act as a hedge against inflation that can erode the purchasing power of cash over time.
4. Appreciation Potential
While past performance does not guarantee future results, diamonds have a long history of appreciation. Polished diamonds less than one carat in size have increased in value by approximately 7% per year on average over the last 35 years according to industry reports. Larger, high-quality diamonds have seen even stronger rates of appreciation. As living standards rise globally, more consumers can afford better quality diamonds, fueling increases in prices. Of course, there is also potential that individual stones may not appreciate or could lose value depending on factors like cut, color, clarity and current demand trends for that particular diamond. But overall, diamonds have served as a store of value that retains purchasing power and has the potential to increase in worth over the ownership period.
5. Liquidity and Resale
Should you eventually want to sell your diamonds to realize their value, there is a robust and global marketplace to facilitate resale. Reputable diamond exchanges and auctions make it possible to convert diamonds into cash relatively quickly. Unlike some alternative investments that are illiquid, it is usually not difficult to find willing buyers for diamonds, especially higher quality stones, even in times of economic uncertainty. Various online diamond trading platforms and jewelers also offer the ability to sell diamonds and get cash in hand efficiently. This liquidity allows diamonds to function well as a long-term investment.
6. Diversification Benefits
Adding a small portion of diamonds to your overall investment portfolio provides diversification benefits. Diamonds don’t always move in tandem with stocks, bonds or property. So in times when other assets decline, diamonds may hold steady or even appreciate. This helps reduce overall portfolio risk and volatility. Diamonds offer exposure to an alternative, tangible asset class not correlated to traditional markets. Even a small diamond investment of just a few percent of your portfolio can enhance diversification without overly concentrating your holdings in a single asset.
Conclusion
Diamonds are a beautiful and timeless way to potentially create long-term wealth or store value. Their rarity, global demand, inflation-hedging qualities and history of appreciation make them an attractive investment worth considering – especially for those seeking an alternative to paper assets. This includes diamonds used in bracelets. Of course, do your research on diamond grading and only purchase top quality stones from reputable sources if investing in diamonds appeals to you.
