10 Tips for Beginners Investing in Diamonds

Tips for Beginners Investing in Diamonds

With current market fluctuations and conditions, many more people are looking for alternative assets to add to their portfolios. While many investors have traditionally turned to physical commodities like gold and silver, diamonds are becoming an increasingly popular investment option. If you are looking for new ways to diversify, here are a few tips for beginners investing in diamonds.

Why Are People Investing in Diamonds?

Here are a few of the most common reasons why more investors are turning to diamonds as a new portfolio option.

Market Volatility

The recent stock market volatility has many nervous investors looking at alternative assets. Physical commodities like gold, silver, and diamonds have always been a popular option to protect investors. However, there is an increasing interest in physical commodities that are not correlated to the stock market as prices continue to fluctuate.

Portability

Another reason people are investing in diamonds is their portability. They are small and easy to transport. Their size also makes them simpler to store than other types of assets.

Durability

Diamonds are the hardest known substance on Earth. Therefore, there is little to no chance of accidental damage or breakage. And, you won’t have to pay for maintenance or upkeep either.

Insurability

Many owners worry about theft or loss. However, you can insure your diamonds as an extra precaution to protect your assets.

Inflation-Proof

Market demands have always been high, so it’s very unlikely that diamonds will lose value. That’s why some think of them as “inflation-proof.” As mentioned above, some investors use them to hedge against inflation and market fluctuations. This is usually a smart financial move since their value keeps up and often outpaces inflation rates.

High Demand

Diamonds have an intrinsic value because of their limited supply and high demand. The fact that there are no open markets or exchanges also drives up prices. Historically, there has been a steady demand which is continuing to rise.

The Psychology of Security

There is also something to be said about the security you have from a tangible and valuable asset like diamonds. Having something that you can see and feel makes it more real than buying stocks and bonds. Keeping them nearby or on your person may make you feel that your investments are more secure.

Enjoyment

Lastly, you shouldn’t overlook their enjoyment factor. Diamonds are an asset you can enjoy without depreciating value. You can mount and wear them, using them for more than just investment purposes.

What Are the Risks?

As with all investments, diamonds also carry risks. The first comes from a lack of price transparency. It’s hard to place a standard value on them without an official price index. It’s even more difficult with rare and colored diamonds. Although diamonds are expensive, you need to become an informed buyer. Markups erode their investment potential. And, if you aren’t careful, you could be taken advantage of and overpay.

Another factor to consider is physical storage. Theft is the biggest threat. Therefore, you’ll need a safe place to store your assets. Then, there is the low liquidity and the time it takes to find serious buyers. And last but not least, it could take years for your diamonds to appreciate. So, if you’re looking for assets that have quick turnaround and resale value, diamonds probably aren’t the best option for you.

10 Tips for Beginners Investing in Diamonds

Despite these risks, many investors are not deterred. If you are interested in diamonds as an alternative asset, here are 10 tips from the experts for beginners who are investing in diamonds.

1. Do your research and get an expert opinion.

If you are just getting started, learn the basics and get familiar with diamond jargon. You can start with the 4 Cs of diamonds – carat weight, cut, color, and color – and how these factors affect their value.

But, remember each diamond is unique. Before you purchase anything, find a trusted professional to gain more knowledge about specific items. You should seek out multiple opinions before investing.

2. Know your financial goals.

You should also be aware of your financial goals. Diamonds are a great option for safe, long-term investments. However, they aren’t so great if you need a quick turnaround or appreciation.

3. Know your financial limits.

There’s no way around it…investing in diamonds requires more of an initial investment than other assets. But, this will be part of your portfolio. However, you should still know your financial limits and how much you are willing to spend.

4. Always look at the documentation.

This should go without saying. But, only purchase certified diamonds. Real gemstones come with a GIA or IGI certificate from the most renowned geological labs with the strictest standards. And, anyone you sell to will expect these documents as well.

5. Compare prices.

As with all large purchases, you should compare prices. Pricing on diamonds can be subjective. Especially since there isn’t a transparent pricing platform. But, you can compare prices for similar stones through online retailers or local dealers to make sure you are getting a good deal.

6. Look for quality and resale value.

When it comes to diamonds, you don’t want something that everyone else has. Yet, you want to buy something of quality that will have future resale value. Look for high-quality gems and desirable cuts that will bring a higher resale value.

7. Diversify.

Any advisor worth their salt will tell you that diversification is the key to protecting your portfolio. That’s why many investors turn to diamonds as an alternative investment. But, don’t put all your proverbial eggs, or in this case diamonds, in the same basket. Purchase different types, cuts, and sizes. You never know which one will increase in value or which one will be easier to sell down the line. And, if you need to liquidate a portion of your assets, it’s easier to sell smaller stones than with a single large diamond.

8. Mounting a diamond adds appeal.

Although the mounting isn’t included in the valuation, it can add appeal. While the buyer likely has their own plans, mounting it can showcase the diamond. Not only is it much more appealing than a loose diamond, but it can also help you sell it faster. Mounting the stone also allows you to wear it and show it off to potential buyers.

9. Skip the middleman.

One of the biggest mistakes beginners who are investing in diamonds make is buying from your local jewelers. Retail prices are much higher which erodes their value. Rather than pay the markup from brokers taking their cut, look for sources higher up the distribution chain. You can cut out the middleman and try to buy directly from manufacturers.

10. Don’t be afraid to speak up.

Finally, if you have questions or concerns, don’t be shy. Speak up! Ask consultants, experts, and online forums for advice. Or, talk to other investors about their experiences. Learn everything you can before delving into the world of diamonds. Knowing the market could help you find a diamond in the rough.

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6 Steps to Start Investing

Investing money can be exciting, but also daunting, especially if it’s your first time. There are a number of ways you can invest your cash in the hope you’ll get decent returns, all which come with different conditions and considerations. You might want to buy shares in the stock market, purchase premium bonds, put money into property – whatever method you choose for your investment, there are the same initial considerations that you should take into account.

So, where do you start? We’ve listed six steps for you to follow when you choose to start investing.

1.Determine if you’re ready

Before you start investing, it’s important that you make sure you’re actually in a position to do so in the first place. Do you have any debts or outstanding payments? Always clear all your debts first, so that you are in the best position possible. Ideally, you’ll have a lump sum set aside to invest with – it’s never a good idea to use all your money at once when investing. If you’re satisfied that you’ve got a decent amount to invest, as well as an adequate amount in an account to keep you going should your investment fail, then you’re ready to start the process.

2.Have back-up funds

Always have an emergency fund set aside, preferably in an easily accessible account, if you’re going to be investing any money. Not only can this be used as a buffer should your investment fail, it will provide you with a back-up for any emergencies that crop up. Life can throw unfortunate curve-balls when you’re least expecting it, so you need to be prepared just in case. Ideally, you should aim to have at least a few months of living expenses in your emergency fund and promise yourself not to dip into it unless absolutely necessary.  Even if you never have to use your emergency account, you’ll at least have peace of mind that you’ve got something to fall back on.

3.Download an app

Organising your investments can be overwhelming and time-consuming, especially if you have more than one type of account. It’s therefore a good idea to consider tracking your investments with an app. There are a number of investment apps, many of which are free to download and use. Having all your investments organised within an app will streamline the investment process for you and enable you to monitor and track everything more efficiently. Many of these apps offer useful financial advice and can help you to assess the risks associated with each investment. Whether you’re a first-time investor, a professional, a day trader, or just looking to use the best budgeting tools, there is an investment tracking app for you.

4.Decide how to invest

As there are so many methods in which to invest your money, it’s important that you do your research in order to establish what type of investment is best for you, not what seems the most attractive. For instance, just because your friend did well from buying and developing property doesn’t mean you will too – can you afford the time and expenses to renovate an entire property into a sellable asset? Do you have the relevant skills and contacts to do so? Perhaps you want to invest in the hope it might secure your funds years in the future, say for your retirement. If that’s the case, then perhaps something where your cash is locked away – such as in a government premium bond or high yield savings account – is a more suitable option for you. Take a serious look at your situation and consider what time and costs you’re able and willing to give before you decide how to invest.

5.Start small

Once you’ve decided how to invest your money, it’s a good idea to start small. Investing money for the first time can be daunting, so it’s a good idea to start by just dipping your toe in the water in order to get a feel for the market. That way, you can pull out early if anything goes wrong and you’ll avoid losing too much. This is especially important if you’re investing in the stock market and you don’t want to risk losing a lump sum of money. Likewise, if you’re investing in property, then buying a small apartment to develop and gradually building up to larger properties is a better idea than just jumping into one massive project with all your funds. If this is your first experience with the stock market, try investing a small amount each month to get you on track, then increase it over time if you wish. You could start by contributing £20 every month – although some providers will accept as little as £1 at a time. By investing small amounts on a regular basis, it will help you to familiarise yourself with the trends in the market and allow you to take advantage of any highs and lows; for instance, you can buy up several shares when the stock market is performing poorly and prices are lower.

6.Understand the risks

It’s all very well having the relevant funds to invest and to fall back on, but you need to make sure that you understand the risks involved. Generally speaking, the longer you can have funds locked away, then the more risk you should be able to take while seeking higher returns, but this is not always the case. All investments carry some amount of risk, and the value and income you receive from them can fluctuate depending on a whole range of factors. There might also be extra charges attached to some investments, which can really impact on your returns. That is why it is so important that you do your research beforehand. Ideally, try to use providers that either charge a fixed fee or a one-off percentage on your investment.

Conclusion

Choosing to invest money is a big decision. However, as long as you follow the necessary steps, you should be able to invest with confidence.