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I have been involved with binary option trading for quite some time now. Unlike most traders in this vertical, I’ve always managed to make ends meet. I did make money trading, but I also took the time to educate others, and at the end of the day, this turned out to be the most rewarding part of my trading career, not just on account of the help I gave others, but in regards to direct financial gains as well.
Everyone who has ever traded binary options – profitably or otherwise – will tell you that the volatility in this vertical is indeed nerve-wrecking. While I did well, I couldn’t shake the feeling that I was never more than a couple of clicks away from disaster. This burden I simply couldn’t ditch, even when impending doom was clearly not in the books. It had become obvious that I needed to branch out and move into something perhaps less rewarding in the short-run, but much more stable and laid-back overall. Profits still had to be had though, so the choice was not an easy one.
Fixed-income investments did not represent a workable path, on account of their negligible yields. Equity markets came with the same sort of volatility I was looking to escape. The answer? Diamonds.
Gems have traditionally been vehicles of value, but their use as investment vehicles only recently began to emerge. Looking to expand their portfolios and to increase yields, institutional investors were driven into diamonds the same way I was. With various hurdles out of the way (like the lack of transparent pricing and a liquid trading market), the path has become clear for everyone to join this stable commodity market, which dangles potentially high returns within reasonable time-frames. For the little guy, the retail trader, this opportunity was much delayed. Now though, with the emergence of trading platforms like DiamondsRush.com, everyone has a change to put some money into these spectacular stones, hoping to be able to cash out more further down the line.
The advantages of using diamonds for investment purposes are rather clear. Touted by some as the “new gold,” diamonds offer some advantages even above and beyond what precious metals do.
Expected profitability on diamond investments (when done right, of course) is upward of 8% per year. The price increases associated with this new “commodity” have indeed been exactly in that range for the last 5 years. On some diamonds (fancy, colored stones) this price increase has been much bigger. Security is touted as another inherent advantage of the fancy stones. Given how they tend to not only preserve value, but to actually increase it over the years, this angle is quite self-explanatory.
Liquidity is also touted as an advantage by some, given how there is now a standardized global valuation system in place in this regard, though frankly, this angle might rather be considered an Achilles’ heel of the setup rather than an actual advantage, as readily exchanging your stones for currency might still not be as easy as it perhaps should be at this point.
The tax benefit angle on the other hand definitely holds water. In many countries, diamonds are classified as works of art, and as such, they do not fall under taxation. Couple this with the fact that the stones concentrate a massive amount of value in a relatively small and easily transportable spot, and you do indeed have the perfect weapon against the taxman, not that I condone such behavior.
The hedging value that diamonds bring to the table cannot be ignored either. The trading in these precious stones is not controlled by outside institutions, and speculation is virtually absent. The last diamond-business bubble – and its subsequent bursting – took place in the 1980s. That’s indeed quite a testimony to the overall stability of this market. Even this bubble was one focused on a very small section of the diamond market: 1-2ct stones, which do indeed represent the most vulnerable segment to this day, due to their relative accessibility to the masses.
If you too are considering pouring some of your money into diamonds though, there are a number of things you should definitely know and understand before you make your move.
First of all: how are the stones priced? A formula can be used for this purpose to simplify things, called Tavernier’s Law. According to it, the price of the stone is determined by its weight in carats to the second power, multiplied obviously by the price of a single carat, as determined by the market. The formula makes it clear that with increasing carat-weight, the price of the stone rises exponentially rather than in a linear manner. If a one-carat stone is worth $1k for instance, a 10ct one will be worth $100,000.
That said, there is no universal price-per-gram for diamonds. When I mentioned a standardized global valuation system above, I referred to a set of standardized guidelines used to determine the value of various stones.
According to these guidelines, there are 4 characteristics instrumental in price-evaluation: carat, color, clarity and cut. The Rapaport Diamond Report represents one such set of guidelines. There are several such Reports though, like PriceScope, the Troy Diamond Report etc.
The price of the “commodity” used to be controlled through tight supply-controls, exerted by the DeBeers cartel. Since 2001 though, when the said cartel was broken up, the price-controlling mechanism of supply and demand has vaulted to the forefront.
Synthetic diamonds represent a major problem for retail investors. To make a long story short, as an investor, you do not want to be sold such stones. In this regard, technology has caught up with mother nature, making the artificial production of diamonds possible in the required sizes and chemical composure. Such artificial diamonds are not as valuable as their natural counterparts though.
Another thing that needs to be known about diamonds is that in the UK and EU, they are in fact subjected to sales tax and VAT, so that somewhat diminishes their utility as investment vehicles.
One of the driving forces behind the seemingly unstoppable price-explosion of diamonds is the limited supply. Apparently, no new diamond mines have been opened in recent years, and the ones that currently operate, are very expensive to maintain.
Increasing demand is obviously also part of the picture, perhaps its biggest part too. Despite setbacks such as the 2008 global financial crisis, the global economy steams ahead at never before seen speeds. Indeed, the world around us is getting smaller by the day and wealth is being created in scores of locations around the world which never really had access to the free markets and the benefits of the global economy before. Eastern Europe is on this list, together with China, where demand for the fancy rocks has simply skyrocketed. Russia’s ruling class and increasingly wealthy middle class has been known to fancy diamonds as well. More and more people worldwide want rocks for one reason or another, even as there are no increases in production.
For the first time in history, fine gems are not purchased for their value as works of art, but rather, as an investment, by an increasingly large segment of retail investors, as well as institutional actors, such as private banks and private equity funds. The amount of money such institutional investors can afford to sink into diamonds has been a true game-changer and massive price-driver indeed. Such institutional investors are looking at the best, finest and most expensive rocks, as obviously, such gems offer the biggest potential upside: not only are they just about guaranteed to keep their value, they are quite likely to increase it.
How do you invest in diamonds?
There are obviously several ways to do it, one of which would be to join a diamond fund. There are several such investment funds available, though their minimums are quite daunting for most: you will have to invest at least $250,000. That is obviously beyond the reach of the little guy.
There are special events held every now and then by various diamond producers, who aim to specifically sell investment-focused diamonds at these events. Needless to say, price-wise, the sky is the limit at such events too, because the more money one has to invest, the bigger his/her eventual returns are slated to be. Such events are not for the little guys either.
The solution is a diamond trading platform like DiamondsRush.com, which I already mentioned above. What do you need to know in regards to your diamond trading platform?
First of all: you need quality stones at affordable prices, and when it comes to quality, these stones need to be top-notch in more ways than one.
On one hand, they obviously have to be as flawless as possible physically. They also have to be ethically sourced. Everyone has heard about “blood diamonds,” precious stones obtained and trafficked at a great human cost by various unscrupulous individuals in lawless areas of the world. No ethical diamond trader will have such stigma-carrying stones on offer.
The diamonds offered at DiamondsRush are all GIA certified and they have all gone through the Kimberley process, to make sure they do not come from conflict areas.
The Kimberley Process Certification Scheme was set up in 2003, by the UN General Assembly’s Resolution 55/56. According to its requirements, every international rough diamond shipment has to be accompanied by a Kimberley Process Certificate, issued by the government of the country from where it originates. The rough diamonds need to be locked in tamper-resistant containers. Only other KPCS-members can receive such shipments.
While the efficiency of this process has indeed been called into question by at least one organization, the KPCS remains the single best way to control the origin of diamonds and to make sure conflict stones are kept away from the international markets.
With the KPCS comes an international system of warranties, in addition to which, DiamondsRush makes use of an equally intricate and far-reaching system of certifications, encompassing associations like Gemological Institute of America, the International Gemological Laboratory, HRD Antwerp, the International Gemological Institute, the European Gemological Laboratory and the American Gem Society.
The diamonds on offer at DiamondsRush can cost as little as $300, though as a would-be investor, you need to understand that the more expensive they are, the more likely they are to increase in value over time. There’s a set of principles you should know in regards to determining the value of individual stones.
The demand of the markets is the most important value-determining factor, in addition the above mentioned 4 Cs (Clarity, Color, Carat and Cut). The markets like colored, fancy diamonds, so these are the best suited for investment, and as such, these are obviously more expensive too.
For a beginner, making the correct first moves when investing into diamonds can indeed be a daunting task. You will obviously be quite clueless when you make your first purchases, but fortunately, DiamondsRush’s customer service essentially takes you by the hand and guides your first steps.
The customer service is available every weekday from 9:30 GMT+2, to 22:00 GMT+2 and they are professional as ever. There is a live chat option available as well, so requesting immediate support is easier than ever too. The operator has more than 800,000 diamonds on offer and it has all sorts of deals in place to facilitate the secure storage and transportation of the stones you purchase.
Every diamond offered for sale by DiamondsRush is fully insured, from the moment of purchase right up to the moment of reception. Should secure storage services be needed, they are available in various free-trade zones, where storage fees are the lowest available.
If you’re seriously considering investing into diamonds, remember that no new mines have been commissioned over the last 25 years. Scarcity is indeed there, and the price-history of this new (and extremely beautiful) commodity is solid testimony to the potential that is definitely there as well in these investments.
Feel free to explore DiamondRush.com to learn more. I suggest leaving your name and contact information as well to receive a free consultation and introduction to the trading platform. I will share more information about this site in a future review if people are interested, including how to make the most out of the site and how to use the DiamondRush trading robot to buy and sell diamonds. Just drop me a comment below and let me know if you want to receive additional posts from me about this interesting and highly lucrative investment opportunity.
Will you invest in diamonds?