Alternative Investments: Diamonds & Precious Stones

Precious stones are similar to precious metals in many ways and the most common characteristic between precious stones such as diamonds and precious metals such as gold are the fact that they are finite resources and due to this they can be established as an alternative investment option.

Nevertheless, any format of investment are coupled with risks that must be taken into consideration and mitigated according to specific risk factors regardless of the fact if the risks are direct risks or indirect.

Therefore, within the scope of investing into loose diamonds or wholesale diamonds there are a few things that one must be aware of prior to embarking on investment into loose diamonds which is very different from buying diamond jewellery.

What one needs to be critical about when it comes to investing into loose diamonds is quality, grading reports, liquidity considerations, storage and proper due diligence or research.

Diamond Quality Factor

A diamond is valued based on four specific factors which are carat, colour, cut and clarity and these factors are more popularly known as the 4Cs. The simple fact is that higher the quality of the diamond, the higher the value of the diamonds and it is important to realise that when one invests in loose diamonds the focus should essentially be on quality instead of quantity.

Grading Reports

Grading reports are critical when it comes to loose diamonds or wholesale diamonds as grading reports that come with diamonds from reputable labs such as GIA or AGS confirm the value of each stone to potential future investors looking to buy diamonds as the report presents an accurate assessment of the diamond’s quality and value.

Liquidity Factors

Liquidating diamonds or converting diamonds into cash could become an issue based on the fact that diamonds are not traded like stocks or bonds on public exchanges which renders precious stones less liquid. Therefore in regards to liquidating diamonds it can be challenging without proper connections which is something that must be established (connections within the industry) before investing into diamonds.

Safe Storage

Diamonds are attractive not only to the average ordinary person because of their aesthetic value, but they are also attractive to unscrupulous individuals who would stop at nothing to get their hands on diamonds, especially loose diamonds for wholesale diamond markets. Therefore, it is important that those wanting to invest on oose diamonds must prepare secure storage facilities to prevent any loss, which is also a primary requirement by insurers.

Due Diligence

Any investment that is to be considered a proper investment must be back by due diligence and based on the volatility of the diamond market which causes the value of diamonds to fluctuate it is important to recognise and understand these factors that influence the market value of diamonds in general.

In short, it is crucial for potential investors to stay up to date with industry trends in order to be able to make informed investment decisions that are practical. Diamond investments should only be considered as an alternative investment that diversifies an investor’s portfolio as diamond investment is deemed as high-risk, high-reward investment.