Given their durability and relatively high price, diamonds offer a good long term solution for investors looking to tie up wealth in volatile economic conditions. Until recently, this was not so easy to do, due to various factors. However, the introduction of a diamond ETF (exchange-traded fund) has helped to make the situation more amenable to investors.
Briefly, an ETF (exchange-traded fund) is an investment fund centered on an index, such as a commodities index. It is possible to buy and sell a stake in the ETF, like any other stock. Investors in the ETF therefore do not buy the actual commodity, only a stake in its performance.
There are various challenges in starting an ETF for diamonds. Firstly, the international diamond market has traditionally been controlled by only a handful of players. Until 2001, De Beers was the main role-player and had a virtual monopoly over the stones. Since then, the number of players has not risen dramatically, and this means that prices are not easily swayed by market forces.
Secondly, it is extremely difficult to set a fixed price for gemstones. Diamonds are not a homogeneous commodity like gold or maize. There are many different sizes and types of stone and their quality is also of importance. For example, two stones of three carats each do not necessarily equate in value to a higher quality stone of six carats.
Issues such as these make diamonds harder to organize as a traded commodity with a standard price on the market. An ETF therefore allows investors to relinquish the need for expert knowledge and industry connections, since they simply invest in the fund. The danger of investing in blood diamonds is also alleviated for them.
The destruction of the monopoly on diamonds in 2001 has caused them to be become far more attractive as an investment vehicle. A diamond ETF offers the perfect opportunity to invest in the stones without being exposed to the risks and volatility of the open diamond market. Anyone seeking to invest in diamonds should research the possibility of making use of the ETF option.
Briefly, an ETF (exchange-traded fund) is an investment fund centered on an index, such as a commodities index. It is possible to buy and sell a stake in the ETF, like any other stock. Investors in the ETF therefore do not buy the actual commodity, only a stake in its performance.
There are various challenges in starting an ETF for diamonds. Firstly, the international diamond market has traditionally been controlled by only a handful of players. Until 2001, De Beers was the main role-player and had a virtual monopoly over the stones. Since then, the number of players has not risen dramatically, and this means that prices are not easily swayed by market forces.
Secondly, it is extremely difficult to set a fixed price for gemstones. Diamonds are not a homogeneous commodity like gold or maize. There are many different sizes and types of stone and their quality is also of importance. For example, two stones of three carats each do not necessarily equate in value to a higher quality stone of six carats.
Issues such as these make diamonds harder to organize as a traded commodity with a standard price on the market. An ETF therefore allows investors to relinquish the need for expert knowledge and industry connections, since they simply invest in the fund. The danger of investing in blood diamonds is also alleviated for them.
The destruction of the monopoly on diamonds in 2001 has caused them to be become far more attractive as an investment vehicle. A diamond ETF offers the perfect opportunity to invest in the stones without being exposed to the risks and volatility of the open diamond market. Anyone seeking to invest in diamonds should research the possibility of making use of the ETF option.
About the Author:
To receive additional information about the diamond ETF, and investment grade diamonds simply call Investment Diamond Exchange (IDX) and account representative will assist you.
No comments:
Post a Comment