How to Invest in Diamonds

Diamonds are the most concentrated store of value that exists. They are tangible, portable and liquid investments that investors make privately. Investors can use diamonds without decreasing their value and they pay no property tax on their investment. Diamonds are a long-term, risky investment. Their value is based on their rarity, which can fluctuate with the discovery of new sources and the exhaustion of old mines.

Difficulty: Challenging

Instructions

1. Learn about diamonds. You must know a lot about gemstones in order to be a successful diamond investor. Start by learning the four c's: cut, color, clarity and carat. Each of these factors influences the value of a diamond.

2. Plan your diamond investments. Start by budgeting how much money you can invest. Then decide what quality diamonds you can afford.

3. Determine if you want to buy loose diamonds or diamond jewelry. Loose diamonds are more liquid because if you need to sell one, you won't need to find someone who likes the setting. Diamond jewelry, however, is an investment that you can wear without diminishing its value.

4. Contact jewelers and diamond dealers. Get information about the diamonds that are available. If you have a special request, a diamond dealer can find the quality stone that you want.

5. Purchase the diamonds of your choice. Hold them for years until they appreciate in value.

6. Buy shares in diamond mining companies for another approach to investing in diamonds. Some diamond miners are listed on the London Stock Exchange's Alternative Investment Market (AIM).

Tips & Warnings

• Always invest in diamonds that are at least 75 points. One point equals .01 carats.
• Only buy round cut brilliant diamonds. Other cuts that are in fashion might not be in fashion when you are trying to sell.
• Only buy loose diamonds that are certified by the Gemological Institute of America, the European Gem Laboratory or the American Gemological Society.

Resources

• Go here for information about diamond companies listed on AIM.