Diamonds are both durable and valuable, making them ideal for investors trying to store wealth over a long period of time. However, investing in diamonds has traditionally been a tricky process, for various reasons. The creation of a diamond ETF as an alternative should therefore be welcomed by investors.
An ETF is a traded stock on a securities exchange. The fund is an investment fund and it is usually based on the performance of an index. It is therefore possible to establish an ETF for traded commodities such as gold and coal. Developments in this direction concerning diamonds are at an early stage at this time.
There are several difficulties in setting up an ETF for diamonds. To begin with, there are not many players in the international diamond market. The De Beers company controlled the global industry until 2001, and since then there have not been many additions to the scene. Ordinary forces of supply and demand are therefore limited in their effect on the price.
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.
An ETF is a traded stock on a securities exchange. The fund is an investment fund and it is usually based on the performance of an index. It is therefore possible to establish an ETF for traded commodities such as gold and coal. Developments in this direction concerning diamonds are at an early stage at this time.
There are several difficulties in setting up an ETF for diamonds. To begin with, there are not many players in the international diamond market. The De Beers company controlled the global industry until 2001, and since then there have not been many additions to the scene. Ordinary forces of supply and demand are therefore limited in their effect on the price.
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