Are Diamonds An Ideal Investment?

They have won the world over with their exquisite charm and disarming glitz

. They are what set dreamy maidens ablaze during an engagement. Are diamonds truly eponymous to "forever"?

Eternity seems like a long time to quantify their overall value but there is an upswing in the diamond market in the recent years. Would these rare gemstones fare well in your investment portfolio?

Investment Potential

The perceived value of diamond rings can be attributed to the expectation to accompany an engagement with a diamond ring - symbolic of eternal commitment. Although, engagement rings are primarily from Western cultures, in the recent decades, Eastern countries like China, Russia, Taiwan and Singapore have shown a rising trend in diamond ring sales. These surging demands has placed diamonds in the position of becoming an interesting investment alternative.

The marketability of diamonds maintains a stronghold mainly because these gemstones are virtually imperishable - unbreakable, always in-fashion and don't tarnish. The natural characteristics of these rare gems are qualities that potential investors look for in a commodity. They're easy to store, they limited reserves and their price could significantly rise over time.

Possible Pitfalls and Setbacks

The 4Cs - cut, color, carat weight and clarity - are the characteristics that determine a diamond's value; therein comes the issue that stumps potential investors. The pricing of diamonds is highly subjective and speculative because of their non-homogenous nature - no two stones are exactly alike so there is no way to benchmark. There is no standardized pricing scheme and respectable sources of pricing are only subscription-based. Lengthy and pricey examination and certification processes need to be done by either the Gemological Institute of America or the International Gemological Institute to verify and to authenticate the actual value of a gemstone.

Additionally, the diamond industry, in general, is comprised of few key players that are very secretive of their operations. An accurate estimate of the global high-quality diamond supply is virtually unknown. This makes it difficult for new investors to enter the game. And though some investment professionals are working to standardize diamond pricing and to create an extended traded fund (ETF) for diamonds similar to that of gold and other precious metals, diamonds are difficult to trade on the spot market and have been greatly tainted by the ensuing conflicts that are caused by blood diamonds.

Good or Bad Investment?

Undoubtedly, diamonds carry with them an air of sentimental romanticism. They are like works of art - something you visually enjoy before considering their monetary value. What woman would refuse an on-bended-knee proposal while being presented with a dazzling piece of art? Still, romance is generally there is to it. A diamond is technically just a composite carbon material that is sought out for its characteristic dispersion of light - making it shimmer. In the end, if you are looking for an investment that will assure you of immediately palpable returns, diamonds should perhaps be among the last to consider. If, on the other hand, you are simply looking to invest in your fiance's happiness, diamonds would be an excellent pick.

by: Kurt Ross

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