Finimize - 💎 Rough time for diamonds

What’s going on here?

Diamonds are forever, but their market share might not be.

What does this mean?

Natural diamond prices have dropped about 8% in the past five years, as more and more love-struck singles popped the question with bigger, cheaper, lab-grown rocks. In the US alone, mined diamond jewelry sales tumbled 0.7% in November from the year before, while lab-grown ones climbed 12.5%. The competition has become so fierce that De Beers – the biggest name in diamonds – recently cut the price of its rough stones by 15%. That’s not a move made lightly: the world’s biggest miner has long used scarcity to keep prices high and rising. But that’s become less effective now that folk can simply buy lab-grown versions instead. Both types of stone have nearly the same chemical and physical properties, after all – and to the naked eye, they’re identical.

Why should I care?

Zooming out: Shiny things.

Diamonds might be your best friend, but they’re not your savviest investment. In the past year, gold was the smarter move: the safe-haven asset’s price rose 27% as central banks and jittery investors snapped it up. Bitcoin – so-called digital gold – also proved shrewd, with a near-vertical 125% rise. A range of exchange-traded funds launched last year helped give fresh credibility to the crypto, landing it in tons of new portfolios.

For you personally: Silver linings.

After a pandemic and an inflation crisis, it seems like costs only ever move in one direction: up. And that makes diamonds a sparkly outlier. Falling demand has chipped away at the price of mined stones, and manufacturing improvements have brought lab-grown prices down too – by 75% since 2020, in fact. And that’s put a lot more bling within reach.

What’s going on here?

“Multi-strategy” hedge funds posted solid gains in 2024, with investment picks that went beyond trusty old stock indexes.

What does this mean?

These types of funds operate like a team of specialized units, with each one focused on a specific approach – like profiting from big mergers and acquisitions, using algorithms to trade commodities, or taking advantage of inefficiencies in bond markets. By spreading their bets across several tactics, multi-strategy hedge funds can manage risk and perform well no matter what markets are doing. That reputation for steady returns is what makes them so popular among investors. And in 2024, they delivered: D.E. Shaw gained 18%, behemoths Millennium and Citadel were up 15%, and most others notched double-digit returns.

Why should I care?

For markets: A risk-adjusted view.

Sure, those returns came up short of the S&P 500’s 23% gain over the same time period. But it’s worth remembering that multi-strategy hedge funds tend to be much less risky, delivering strong returns in many different environments – even when stocks stumble. So if you factor in the difference in risk – as you always should when comparing investments – the funds performed exceptionally well last year.

The bigger picture: Resilience over reliance.

When stocks rally hard, as they did in 2024, a simple buy-and-hold strategy can seem unbeatable. But shares don’t always go up. Sharp crashes do happen – and a recovery can take a decade or more. That’s why it’s worth considering strategies that don’t rely on constant upward movement. And even if you don’t have the kind of wealth required to invest in the world’s big hedge funds, you can take a page from their books: a diversified portfolio or an adaptive strategy might just do the trick.