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Investing in Diamonds

Updated on October 18, 2008

Investing in Diamonds

Diamonds suitable for investment are not necessarily the kind you find in the average jewelry store. Diamonds vary greatly by color, clarity, cut and carat weight— referred to in the business as the four C's. Although there is no real agreement on what constitutes an investment grade diamond, the most readily acceptable ones weigh at least a carat, rank very near the top of the scale in color and clarity, and have been expertly cut for maximum brilliance. A certificate from a recognized gemological laboratory attesting to a stone's four C's should be part of every investment diamond deal.

Most investors buy at retail prices and sell at wholesale. Since markups can range from 30% to even 100% or more, that builds in the necessity for considerable price appreciation just to break even. This makes diamond in­vesting a long-term proposition. Furthermore, gems pay no cur­rent income. Instead, you pay to store and insure them.

When it comes time to sell, you must be willing to wait. It takes time to find a buyer, time to ascertain certification and time to get reliable appraisals. In all, arranging and carrying out a sale can easily take a month or two. Don't invest in diamonds without investigating thoroughly. Know your dealer. Don't buy anything over the phone.


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