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Investing Basics: Knowing How Much To Invest

As with any commodity in the world, the price is fixed by supply and demand and an item becomes a good investment if one of these factors will in the future move in the right direction and create a higher price than that initially paid.

Diamonds at the moment stand at the threshold of an unprecedented demand.  Explosive growth has recently been seen in all types of diamonds, especially in natural fancy colored diamonds. Forbes recently reported that in China, 62% of couples engaged to get married are buying diamond rings an increase from 33% in the 1990's. New investors have been drawn to diamonds due to insecurity of regular investing channels and the lure of having your assets concentrated in a very transportable and small item as well as the option to simultaneously enjoy them. The uncertainty of 'how to sell diamonds easily' has been offset by prices becoming published and internationally standardized. These are just two indicators that rising demand will ensure a price increase.

The supply situation is also in favor of the investor; Kimberlite the host rock to diamonds has reached a all-time low discovery rate with current annual production at around 130 million carats, a serious drop from the 175 million carats in 2006.

Knowing that the diamond is a sound and tangible investment is half the battle and does not answer some other factors that need to be addressed before an investment is made.

Knowing how much to invest

o   Finding suitable channels to realize and sell the purchased diamond investments.

o   Knowing which diamonds are those of investment value. 

o   Deciding on the percentage that diamonds should be represented in one's investment portfolio.   



Natural Fancy Colors as Opposed to Colorless White


Although investing in white diamonds make decisions and choices easier over colored diamonds, the supply and demand factors referred to above are accentuated and heightened with regard to colored diamonds. Supplies are noticeably dwindling with planned closures of diamond mines that are critical for the source of certain colors. The beauty and appeal of natural fancy colored diamonds has given the edge over the traditional 'white colorless' versions when demand is considered.


Searching and Recognizing the Stone for Investment


The traditional white diamond has a historical investment record and statistically the 1 – 5 carat, D – F color, IF (internally flawless) – VS (very slight) clarity can be found easily and sold without difficulty. Returns, although almost guaranteed, are however very modest in terms of today's expectations.


Colors include factors of intensity, hue and shade and often there is a change in the molecular structure or the addition of another element, all creating a wonderful world stretching from exotic blues, passionate pinks and mysterious purples to inspirational yellows, stimulating oranges and soothing greens. They are usually graded according to the intensity of the color as follows Fancy Light, Fancy, Fancy Intense, Fancy Deep, Fancy Dark, and Fancy Vivid.


Their prices and demand are all based on rarity. There is much publicity with fancy colors and when an exceptionally large stone of a unique color breaks selling records at the top auction houses, other smaller stones of the same category all increase in proportionate value.


Due to this factor, it is very often prudent to wait when making a sale for some breaking news about colored diamonds which will invariably cause a positive price change in its wake.


The scale and scope of availability is so wide that a healthy investment can be made for as little as $10,000 with the sky being the limit when considering maximum amounts.

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