Should you hedge your investments against a North Korean conflict? The short answer is yes. Learn why investing in diamonds may be the best market hedge in a crisis.

It’s easy to get swept into the euphoria of an ever-increasing stock market. Even in the face of scrambled politics, natural disasters, and a potential war with North Korea, the stock market continues its relentless rise. The Dow is hovering around a historic 26,000. The big question on every investor’s mind: Will the market continue its bullish drive upward?

Some analysts expect 2018 to post at least modest gains. However, this does not factor in a serious disruption in trade. By serious, I mean a disruption felt on a worldwide basis. What would cause such a serious disruption? One obvious answer is a North Korean conflict that results in significant damage to South Korea’s industrial complex.

South Korea accounts for 2% of the global GDP. South Korea is:

1. The biggest producer of liquid crystal displays in the world (40% of the global total)

2. The second biggest producer of semiconductors (17% market share)

3. Home to the world’s three biggest shipbuilders

Any disruption in South Korea’s massive exports would cause world markets to drop. For the most part, political unrest, natural disasters, and missiles flying over Japan result in market jitters, perhaps a slip downward, but not a long-term plunge. That said, any event that disrupts trade and causes companies to post lower earning is a market killer. The bottom of such a spiral is anybody’s guess.

If North Korea also damages Japan’s industrial complex, causing further disruption to world trade, market panic would almost certainly ensue. The conventional wisdom is to hedge with investments in precious metals. While that makes sense, polished diamonds may be an even better hedge than precious metals. For example, between September 2008, when the fall of Lehman Brothers triggered one of the biggest financial and banking crises of all times, and October 2009, diamond prices declined on average by about 16,5%, gold fell over 21%, and platinum by 59%. Traditional investment portfolio components (shares, bonds, real estate, future contracts) declined sharply as the S&P 500 dropped 52%.

While diamonds are not immune to market declines, polished diamonds have proven to be more resistant. This suggests some portion of your investment portfolio should be in polished diamonds. Diamonds are a solid investment thanks to their constantly growing demand, relative safety, favorable tax treatment, and portability. For the last 50 years, diamond prices grew at an average annual rate of 14 percent. Diamonds, unlike stocks and currencies, are a tangible item. They retain intrinsic value. In fact, diamonds have held better long-term appreciation than gold. Similar to precious metals, diamonds serve around the world as an alternative form of payment. In addition, standardized certifications allow investors to understand the quality of their stones.

While there is no guaranteed hedge against a market crisis, it makes sense to consider including polished diamonds in your portfolio. If you want to explore more about investing in diamonds, consider Diamond XO. Diamond XO specializes in providing the best diamond investment solutions. Their experts understand the diamond market. They are available to help you make the best investment. Diamond XO’s user-friendly platform enables you to buy and sell high-quality diamonds in just a few clicks.

If you have an interest in hedging against a market crisis, click here to learn more about investing in diamonds.

This post is a reprint of my Huffington Post article and is in the Savvy Life Strategie category. Some links in this article are referral links. Please read out Disclosure Statement for more information.