From 1999 to 2011, three-carat diamonds increased by 145 per cent, while five carat diamonds rose by 171 per cent, as measured by the Rapaport Diamond Trade Index. “Certain types of diamonds, including coloured varieties, have held their value over the past few years better than other more volatile equity investments,” says Vashi Dominguez, chief executive of diamond trading company Diamond Manufacturers.
However, diamond trading is an unregulated market that is hard to crack for private investors and adds that the price of cut diamonds is still tightly controlled by De Beers, which invites buyers for the jewellery trade to make sealed bids for parcels of gemstones. There are three main ways for investors to buy diamonds: investing directly in diamonds: buying the gems and storing them to sell at a later date; buying the shares of diamond mining companies; or investing in diamond funds and tax-efficient investments.
Direct own diamonds
Holding physical diamonds is a popular way to invest in diamonds because people can wear their investment if they set the diamonds into jewellery. Dominguez says anyone investing in diamonds should spend at least £5,000 on a diamond and keep it for five years or longer. Advisers say the best way to buy a gem is through a diamond trader. “Unless you are an expert, you will lose money by purchasing through a jeweller,” says Dominguez. “They can charge at least double what diamonds may cost on the wholesale market.” However, Justin Modray, at Candidmoney.com, warns that while investing in tangible assets such as diamonds might seem appealing in these uncertain economic times, there are potential pitfalls. “Perhaps the biggest issue is that, unlike gold, diamonds are not homogenous.
“That means diamonds need to be valued individually based on factors such as shape, colour and clarity, not just their weight”
so it’s hard to track accurately their value as an investment,” he says. “Diamonds also suffer VAT when bought in the UK, which effectively means most investors will face an instant 20 per cent loss at outset.” Then there is the issue of how to store physical diamonds. Darius McDermott, managing director of financial adviser Chelsea Financial Services, says investors who decide to buy and hold diamonds also need to factor in the cost of security and storage. Diamonds will need to be a specified item on home and contents insurance. Investors can find out pricing and trade at Rapnet, the world’s largest online marketplace for certified diamonds.
Cr. Financial Time