Where can I find good returns? This question keeps investors awake at night now they are being confronted with rock-bottom interest rates and a fallen return on the government bonds. Analysts agree that the returns on most assets will stay low for the next decade.
Currently the difference is largely in favour of shares, but analysts state this is purely a reflection of an expected higher return on shares in terms of their risk profile. Just like you can only take out an insurance policy for future risks, you will also need to try and estimate the future profit of the bonds when deciding on your investment. How? By finding out what they are currently doing and taking the prospect of inflation into account, as well as the historic data about the shares’ risk premium.
In concrete terms, shares from the Eurozone will result in a 5% return over the forthcoming years, compared to 12.6% a few years ago.
Bonds give returns in the form of a coupon which is recorded at the time of issuing. The more reliable the buyer of the bond and the shorter the term, the higher returns you can expect. The increasing interest rate will also affect the state bond: the more this rises, the less return you will receive. When you look at the European reference in the form of the German ten year interest rate, this rose from 0.3% to 2% in the last 5 years. This will result in a reduction of the bond portfolio and will soon be resulting in a negative 7% compared to the 4% of recent years.
What does that mean in concrete terms? The defensive investor will have less faith in the government bond and will either opt for short-term forms and only keep 20% in the portfolio, or will move across to alternative investments.
The dive experienced by traditional investments has motivated all investors to look for alternatives. Raw materials are a reliable alternative, with the crisis-proof diamond leading the way. Investing in diamonds therefore means opting for certainty. However, this certainty does not go hand in hand with the minimum return you would expect from a safe investment. Even though the value of the diamond varies, the diamond market has remained stable through the years. You have been able to expect a return of around 15% since the nineteen fifties, as a result of the intrinsic value and the growing gap between supply and demand. Investing in 2018? Diamonds all the way.
Where can I invest in diamonds? How can I be sure I am making the right investment for my profile and portfolio? Ask BNT Diamonds’ diamond experts for advice for your return.
