In the UK, it is the Queen’s Diamond Jubilee weekend celebrating 60 years on the throne and with all the talk of diamonds, I thought it would be appropriate to post my top reasons for why diamond stocks & shares make a good investment.
Of course, investing directly in diamonds is beyond the reach of most of us, but have you thought about investing in the stocks and shares of diamond companies?
Listed below are 13 reasons why you might want to consider investing in some diamond stocks for your own portfolio.
- The largest diamond market is the USA, accounting for 40% to 50% of total global demand, which grew by 8% during 2011.
- Chinese demand for diamonds grew by 30% in 2011.
- Demand for diamonds in India grew by 10% in 2011.
- Although China and India currently represent only 2% and 3% respectively of global demand for diamonds, there are expected to be an additional 400 million new middle class consumers in China and India by 2030.
- Demand for diamond jewellery and polished diamonds (used for jewellery) grew more than 8% in China/India in 2011.
- No significant new diamond discoveries have been made in the last 20 years, limiting diamond supply.
- Diamond commodity majors such as De Beers are selling off their diamond operations to smaller operators – providing expansion opportunities for small diamond mining companies.
- Diamond prices have fallen back in the second half of 2011 but have recently started to pick up again.
- It is easier to buy and sell shares of diamond companies than it is to buy and sell diamonds themselves.
- Shares in diamond companies can be bought with smaller denominations of cash than actual diamonds themselves i.e. shares are a more liquid and less lumpy investment than diamonds.
- It is safer to buy shares than diamonds as your shares can be held in a nominee bank account by your broker and you don’t need to pay insurance premiums to protect them from theft.
- Instead of paying to insure your diamonds, you may receive dividend income from your shares in addition to potential capital gains from a rising share price.
- Due to operational gearing, any rise in the diamond price will be amplified in the profits of the company and thus the price of the shares.
Of course, there is no guarantee that the share price of diamond stocks and shares will rise in the short-term but I believe they will on a long-term view.
With many diamond shares trading on attractive valuations at the moment, now might be a good time to buy.
Remember though that not all companies will perform the same, so do your own research and look at several diamond companies before investing.
If you have found this article useful, please leave me a comment below or click on one of the share buttons.