Are Diamonds Right for You?
Blog - Deep Dive
At Icecap, we only want you to invest in diamonds if it’s a good fit, and makes sense for your specific needs and portfolio. For many people it likely isn’t a good fit. Here’s a quick table that can help determine whether diamond investment could make sense in your case.
Do you share these beliefs?
Rank each of these in terms of how strongly you agree or disagree with the statement.
1 = STRONGLY DISAGREE, and 5 = STRONGLY AGREE
1. HARD ASSETS
Whatever else is true, central banks are going to keep inflating their currencies, meaning those currencies will—in the long run at least—continue to lose value compared to benchmarks like gold and silver. That’s why I believe in owning hard assets, as part of my portfolio.
2. WEALTH PROTECTION
I have enough wealth that protecting it from erosion is almost as important as growing it. And I’ve organized my own portfolio around that concept.
I believe strongly in the principle of diversification. I’m not smart enough to know what the future will bring. But I am smart enough to imagine many different scenarios, some of them quite troubling. My portfolio is based on the principle: whatever happens, no matter how unlikely, I’ll be protected and have financial security.
I believe it important to have some percentage of my wealth in self-custody. I don’t think our financial institutions are going to collapse any time soon. But if they were to, I want to know I have a percentage of my wealth that is not under the custody of any third party. I want some of it under my physical control at all times.
5. LIQUIDITY FLEXIBILITY
I’m willing to park some of my wealth in assets that may not be quick to liquidate, as long as such assets check other boxes for me. Money that I might need on short notice, I will park in assets that come with more or less instant liquidation capability.
6. PORTABILITY & PRIVACY
Although unlikely, I can imagine scenarios in which it’s useful—perhaps critical—to have some percentage of one’s assets in a form that is extremely portable and/or private.
While difficult to achieve, in a perfect world it would be nice to be able to gain benefit from ownership of an asset, not just have it serve as a financial hedge.
Although only a subjective guide, a score of 21 or higher suggests parking some of your assets in diamonds might be a good idea, and the higher the score, probably the better idea it is. By contrast, a score below 21 means you’re likely not a good candidate for this type of investment product.
Diamonds make sense if you want to diversify a percent of your hard-asset portfolio in a way that favors self-custody, portability, and privacy, and are willing to accept a potentially longer liquidation time to achieve those goals. And the fact that diamonds can be enjoyed as jewelry in the meantime provides some—can we say—icing?
Remember these positive aspects of diamonds:
- Over long-term periods, they have consistently held value vs. inflation, similar to other hard assets. (But only if you’re able to sell them at a similar market level to how you bought them—not always so easy.) That said, past performance is no guarantee of future results.
- Diamonds can be self-custodied, in your home, vault, safety-deposit box, or other facility.
- Diamonds, and their value, are very private.
- You can move diamonds easily, discretely, and inexpensively. A million dollars of diamonds can fit in a shirt pocket.
- If you wish, you can put your diamond assets to work as jewelry, to adorn yourself or your loved ones.
- Diamonds can be passed on from generation to generation, as an asset, a form of adornment, and perhaps as something with sentimental value.
But also remember these negative aspects:
- They may not be easy to liquidate quickly or at an advantageous price.
- Diamonds are less likely to see the big (and potentially profitable) shifts in price that you’d find with other assets.
- There is no guarantee you will be able to sell your diamonds for the price you paid, let alone a higher price.
Bottom Line: If you want the advantages from the first list, and are willing to tolerate the risks of the second, then parking a percent of your hard-asset portfolio in diamonds may be a smart choice.
If that’s the case, we have some tips for getting started.