After spending a good chunk of change on my wife’s engagement ring a few years ago, I was a little bit annoyed to read this article about new diamond technology. Evidently, the diamond farming technology has improved to the point where experts can no longer tell the difference between a real and a lab grown.
Growing diamonds like crops
The natural process for creating a diamond requires a lot of pressure, heat and time. Scientists have been trying to duplicate and speed up this process and unitl recently they have been small and impure. But, over the past decade they have had pretty good success.
Researchers have perfected a process called chemical vapor deposition (CVD) which grows pure and comparable sized diamonds in a matter of months. They are so good in fact that the writer of the article went to a jeweler with one of the stones to get an unbiased assessment of the diamond’s quality:
…The next day, I place the .38 carat, princess-cut stone in front of Virgil Ghita in Ghita’s narrow jewelry store in downtown Boston. With a pair of tweezers, he brings the diamond up to his right eye and studies it with a jeweler’s loupe, slowly turning the gem in the mote-filled afternoon sun. “Nice stone, excellent color. I don’t see any imperfections,” he says. “Where did you get it?”
“It was grown in a lab about 20 miles from here,” (he) replied.
He lowers the loupe and looks at me for a moment. Then he studies the stone again, pursing his brow. He sighs. “There’s no way to tell that it’s lab-created.”
So this begs the question: If diamonds will soon be able to be mass-produced on demand, won’t real diamonds be worth a lot less?
Unless they can figure out a fail-proof method of telling them apart, I think it is inevitable. The challenge is that unlike a Gucci handbag and a knockoff, both diamonds are made from the same materials: carbon. One is just created a lot faster than the other.
What good could come out of grown diamonds?
- The positive to this is that those involved in the exploitation of people in this movie may see their profits dry up. I haven’t seen Blood Diamond and I really don’t know much about the whole situation, but hopefully this would help bring it to an end.
- You may be able to get a fat rock for your honey for a fraction of the price. If it is just the sparkle of the gem that you are interested in, it will still be there.
- There are endless technological advancements that can come from the cheapening of diamonds. Some experts think they could, “become as significant as steel or silicon in electronics and computing.”
I will not be pawning my wife’s ring anytime soon, but it may be something to keep in mind before spending your hard-earned cash on a new diamond.
This article was featured in the Carnival of personal finance.
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Should I save for retirement or pay off student loans?
This is a question that I have been asked a lot. Yesterday a reader (Megan) left a comment…
“Hi Bob. I have a question for you. I am a recent grad who had a job and a retirement account during the two years of post-college to starting grad school. Now I’m just starting grad school with student loans and I wanted to find out if it’s best to stop adding to it until I graduate.”
I kind of touched on this in a post I wrote about financial advice for newlyweds.
In the post I was talking about our decision to continue funding our retirement accounts while paying down our debt. I said…
“…I have come to understand the impact that time has over investments. Without getting into too much detail, I will just say that getting started investing early puts you at a high advantage. It is not just a little bit better than waiting, but a HUGE amount better. Having enough for retirement can be a breeze if you get started while in your 20’s. It was for this reason that I wanted to get the ball rolling with my investment portfolio.”
401k’s, Roth IRA’s, and student loans
My student loans were locked in at about 3%, but I don’t think rates that good are available today. I assume a 10% return on my retirement savings, so even if you are paying 5% on your student loans and earning 10% (or even 6%) you still come out ahead. Mathematically, this seems to be the much stronger answer. However, Dave Ramsey’s method -based on our behaviors rather than math - would eliminate any and all debts before investing for retirement.
Personally, if it were me, and I could get 5% or better on my student loans I would be funding an Index Fund within my retirement accounts (401k and Roth IRA). But, at the same time I really hate debt and try to avoid it at all costs.
Do you have any suggestions for Megan? What would/did you do?
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I found this article about Roth IRA’s and I think it is worth posting. It goes over the basics of Roth IRA’s and why you should consider one, if you don’t already have one. If you are thinking, “what’s an IRA?” then you should probably start here.
Right now, you may be wondering why you should invest in a Roth IRA if you currently have a retirement plan (401k, 403b, etc.) with your employer. The Roth IRA has many benefits that other retirement plans don’t have, and chief among them is the fact that your investment earnings may accumulate tax-free. In other words, your Roth IRA has the opportunity to grow without incurring any taxes and can be distributed to you tax free, if some certain conditions are met.
While there are advantages to owning a Roth IRA, there are also some rules you should think about before you decide this is the account for you. First, not everyone can take advantage of a Roth IRA. You or your spouse must have earned income or compensation – this includes wages, tips or salary. However, be aware that earned income or compensation does not include rental, interest, dividend, pension annuity or deferred compensation income. Second, your modified adjusted gross income cannot exceed certain limits. For single people, your modified adjusted gross income must be less than $114,000 and $166,000 for married couples filing jointly.
Contributions you make to the account are not tax deductible, but may be withdrawn any time without tax or penalty. Before taking withdrawals from your Roth IRA you need to determine if you are receiving a “qualified distribution.” Any withdrawal that is not a “qualified distribution” can result in income taxes and IRS penalties. For example, any earnings on your principal will be subject to income taxes should you decide to withdraw them prior to the five-year holding period or before age 59 ½ (contact your state department for state tax rules). In addition, these earnings are also generally subject to a 10% IRS penalty.
Tax and penalty free withdrawal of your Roth IRA earnings for “qualified distributions” can be made once a five-year holding period is satisfied and one of the following applies: you have reached the age of 59 ½, you have become disabled, the funds are used for a first-time home purchase (subject to a $10,000 lifetime limit) or the funds are distributed to a beneficiary after your death.
After thinking over the rules, if you are eligible for a Roth IRA you may be wondering how much you can contribute. For 2008, you may make regular contributions that do not exceed $5,000. If you are 50 or older, you can also make “catch-up” contributions of up to $1,000 per year for a total contribution of $6,000.
A couple of other important items worth noting – contributions to your employer’s retirement plan do not exclude you from making contributions to a Roth IRA, and owning a traditional IRA does not prevent you from setting up a Roth IRA either (although contributing to a traditional IRA for the same year will limit the amount you can contribute to your Roth IRA).
Whether or not you decide a Roth IRA is the right retirement account for you, it’s always smart to plan ahead and save money for the future. Never underestimate the importance of saving for the future and using a variety of investment vehicles to achieve your goals.
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One of the joys of working at a brokerage firm is that people are always asking me for investment advice or telling me about how they don’t trust their broker.
Probably the most frequently asked question is, “how do i [tag]save money for retirement[/tag]?”
First, I tell them to follow these 4 steps to retirement savings, and then I tell them not to worry about your rate of return when you are starting out. Yes, it is better to get 12% on your money than 8%, but when you are just starting your retirement savings it should be the least of your concerns.
Let me preface this by saying, this advice is for [tag]beginner[/tag]s who are intimidated by saving for retirement to the point of DOING NOTHING. This is what I suggest to keep them from worrying about which mutual fund to buy when they are starting out.
The biggest hurdle for most people is [tag]saving money[/tag]. As Dave Ramsey
Let’s say you start saving $100 a month towards retirement. When you first start investing, the $100 a month contribution is going to have a larger impact on the size of the total amount saved than your rate of return.
For example, if you have $1000 saved up and add $100, you now have $1100 - which is a 10% increase. But if you have $10,000 saved and you add $100, it is only a 1% increase. Once you have $100,000 saved up that $100 monthly contribution becomes even more insignificant; it is only a 0.1% increase.
So, if you are only increasing your account value by .01% each time you contribute, then it would not be nearly as effective as having a 12% rate of return.
As you can see the importance of consistent contributions is CRUCIAL in the beginning stages, but becomes less significant as your nest egg grows in size. Conversely, your rate of return on your investments starts out with little importance, but becomes CRUCIAL as your nest egg gets larger.
So, if you are a beginner, get started saving and you can take your time learning about which mutual funds are going to give you the best returns.
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The best quotes from Warren
If there is any investor who you could look up to and use as a “role model,” [tag]Warren Buffett[/tag] would be your man. He takes a simplified and [tag]long-term[/tag] approach to [tag]investing[/tag]; and he puts all of the Wall St. day-traders to shame. He is without a doubt one of the greatest investors of all time, and has been in the top 5 richest people for decades. When you hear him speak, he is likely to resemble your grandfather with his sincerity, down-to-earth nature, and wisdom from years of living. If you cannot tell, I am a FAN of Warren.
I gathered a list of [tag]quotes[/tag] from Warren Buffett over the years about life, money, investing, and anything else. If I have any of your own favorite Warren Buffet quotes that I may have missed, please add them to the comments.
Also check out these 9 tips from Warren and these Warren Buffett videos
- A public opinion poll is no substitute for thought.
- If past history was all there was to the game, the richest people would be librarians.
- Risk comes from not knowing what you’re doing.
- Only when the tide goes out do you discover who’s been swimming naked.
- Look at market fluctuations as your friend rather than your enemy; profit from the folly rather than participate in it.
- Chains of habit are too light to be felt until they are too heavy to be broken.
- I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
- I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
- If a business does well, the stock eventually follows.
- In the business world, the rear-view mirror is always clearer than the windshield.
- It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
- It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
- It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
- Let blockheads read what blockheads wrote.
- Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
- Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
- Our favorite holding period is forever.
- Price is what you pay. Value is what you get.
- Risk is a part of God’s game, alike for men and nations.
- Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
- The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
- The first rule is not to lose. The second rule is not to forget the first rule.
- The investor of today does not profit from yesterday’s growth.
- The only time to buy these is on a day with no “y” in it.
- The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.
- There seems to be some perverse human characteristic that likes to make easy things difficult.
- Time is the friend of the wonderful company, the enemy of the mediocre.
- We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’
- We enjoy the process far more than the proceeds.
- We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
- When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
- Wide diversification is only required when investors do not understand what they are doing.
- You only have to do a very few things right in your life so long as you don’t do too many things wrong.
(Warren Buffett quotes added 05/07/08…)
- It’s better to have a part interest in the Hope Diamond than to own all of a rhinestone.
- I should emphasize that we do not measure the progress of our investments by what their market prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the businesses we own. The first test is improvement in earnings, with our making due allowance for industry conditions. The second test, more subjective, is whether their “moats” – a metaphor for the superiorities they possess that make life difficult for their competitors – have widened during the year.
- She’s smart, she loves the business, and she loves her associates. That beats having an MBA degree any time.
What are your favorite Warren Buffett quotes?
Please share in the comments below…
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