The past few years have been the opposite of “business as usual.” For the better part of two years, the pandemic ground the entire economy to a halt. Due to this, millions of people temporarily or permanently lost their jobs. In response, the government printed trillions of dollars in stimulus payments. For a while, it seems like each major announcement sends shockwaves through the stock market. If you are a very risk-averse investor, this type of economy is a living hell. Due to record volatility in the stock market, lots of investors are starting to look at alternative investments. Specifically, there is a high interest in investing in diamonds.
Many people own maybe one or two diamonds. Usually, people buy them as a gift for someone special. But do investors actually consider them a legitimate way to store money? Let’s take a quick look at a guide to investing in diamonds.
What’s The Point Of Investing In Diamonds?
Diversification: Practically every investor knows the importance of diversifying their portfolio. Honestly, this is probably the first thing that every investor learns. 99.99% of financial advisors will tell you that diversification is key to protecting your money. For example, let’s say that you only own one stock. If that stock drops 50%, you’ve just lost 50% of all your money. This could wipe out years of hard work in a matter of minutes. On the other hand, owning twenty stocks is a much safer strategy. Even if one stock falls in value there’s a good chance the other nineteen will perform well. This gives you a much better chance of coming out on top.
But what about times like March 2020? In a matter of weeks, the entire market dropped approximately 30%. It doesn’t matter how many stocks you own if the entire market is down. This is why some investors turn to alternative assets.
Alternative assets are things that have value but are not traditional investments. Traditional investments are things like stocks and bonds. Alternative assets can be just about anything that people find valuable. A few examples are things like commodities, collectibles, classic cars, cryptocurrency, NFTs and gemstones. Let’s examine a few pros and cons of buying gemstones. Specifically, investing in diamonds.
Pros Of Investing
- Diamonds have high intrinsic value. If you’ve bought a diamond before, you already know that they’re very pricy. Lots of people want them, but there is a limited supply. There is also no terminal market or open diamond exchange. This makes it difficult to resell them. All of this creates a high price.
- They are almost always in demand. This means that …….
