Are Diamonds an Investor’s Best Friend?
Diamonds are small, compact, easy to transport, tradable worldwide and steadily appreciate in value. They can offer protection against high inflation and are one of the hardest currencies in the world. Because of this, diamonds could be a good addition to your investment portfolio to further diversify it.
The most traded types of diamonds are round brilliant diamonds; this is the most popular diamond cut. Strictly speaking, the word diamond itself only refers to the raw material itself. The smaller the brilliant, the better its clarity grades and therefor its quality. This is why brilliants of one carat have the best price development, which is why they are most frequently traded.
A diamond’s quality is graded according to the so-called 4C’s (cut, colour, clarity and carat weight) which were established by the Gemological Institute of America (GIA). These factors determine a diamond’s rarity and value.
Each diamond receives a serial number, which is microscopically engraved in the diamond by laser. These links the gem stone to their respective certificate, which is an official report issued by reputable labs like the GIA, that contains all key information, like the 4Cs, fluorescence and symmetry. Serial numbers and certificates are used to prove a diamonds authenticity and to make sure that it is neither a blood diamond, nor that child labour was used in its production.
Taxes & Storage
The physical possession of diamonds is subject to taxation; VAT is added as soon as you have the diamonds sent to your home. You can, however, have them stored in a duty-free warehouse for you, so that no VAT is charged.
The sale of diamonds is free of income tax after you have owned them for a year, even for private investors. This means that, if you choose to have your diamonds stored in a duty-free warehouse, there will be no additional costs apart from the warehouse rent.
Diamond Trade
Diamond trade mainly revolves around a select few cities. Antwerp in Belgium is widely recognised as the world capital of diamond trade; other big diamond trading centres are located in New York and Mumbai. As a private investor, it is nearly impossible to access these trading centres. This is where diamond dealers come into play, who, of course, need to be trustworthy professionals.
A diamond’s trading price is determined exclusively by supply and demand. Usually, the worldwide production of natural diamonds cannot meet demand, which is why diamond prices have increased in the past and will hopefully continue to do so in the future.
