Dear Diamond Chat Forum users,

I have set funds aside for experimental investing.  I would like to invest some of my money in diamonds.  At this point in time it is extremely important to me to have a liquid investment.  This main theme guides my following questions.  I would appreciate any help from your wealth of knowledge that you could offer.

Questions:

1.  What Diamond (Cut, Carat, Clarity, and Color) is currently the most liquid on the market place.  By liquid I refer to a diamond that has the maximum number of buyers at any given point in time so I may easily off load my investment.

2. What combination of cut, carat, clarity, and color makes it such that the marginal return on spending an extra dollar in upgrading to a higher quality diamond proves diminishing returns (i.e. at what point is money better invested in another diamond with the same characteristics rather than upgrading a given diamond).  Please keep in mind that I am again with this questions talking within the realms of the extremely liquid market (i.e I do not want to venture into the rare diamonds that are hard to sell.  I am looking for the best investment with extremely liquid characteristics).

I appreciate your help.

You correctly identified that the problem with diamond investing is the lack of liquidity but you are incorrect in identifying the solution to be a function of the gemological properties of the stone(s). It's a function of market selection.

There is no marketplace where you can quickly unload diamonds for full value.

The extremely liquid market you're seeking does not exist unless you are willing to steeply discount the price, which sort of defeats the whole point of investing. Even people who own jewelry stores and full time professional diamond dealers struggle with this. A diamond dealer may spend years waiting to unload a particular stone or it might go in a week. One of the big variables is your own selling skills and the amount of effort and money you are willing to put into the sale. Are you prepared to open up a store or some other venue to do your sales? Are you willing to pay a commission to someone else who is? On high end goods, say $50k+ items, the major auction houses will do the deal for a fee of about 20% split between the seller and buyer. Lots of local stores and web merchants want anywhere from 10% to 50% for consignment programs depending on the value of the merchandise, the relationship you have with the store and the amount of effort they are going to put into bringing in top prices. Of course some are just better at it than others and this needs to be part of your formula. Criagslist is free. A good deal on the sales commission does you no good if it doesn't actually result in a sale or if it ends up with a lower price. The answer to your question of what sorts of stones to buy will depend on you answer to the above marketing questions. Not every store does equally well with the same sorts of goods and what you want to own is the kind of thing that moves will in the sales venue you've chosen.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA

Professional Appraisals in Denver
www.gemlab.us

Thank you for the reply Mr. denverappraiser! Your post helps a lot.
chloei