Looking for an alternative investment vehicle that has intrinsic value? A lot of people invest in gold, but more and more investors are considering diamonds.

Why? Their popularity has risen steadily over the past hundred years. That’s largely because of marketing, though, not ‘intrinsic’ value.

Diamonds do however have industrial use. Indeed, 80% of the diamonds mined are used for their hardness and impressive cutting properties in industry. Not in jewelry for their beauty.

Should You Invest in Diamonds?

Nonetheless, the value of diamonds fell approximately 12.5% in 2012 according to industry analyst firm Rapaport. However, diamonds are still up overall for the past decade by 53%.

Fluctuations in the market are common and there are some complexities in the diamond market. One complication is the fact that no two diamonds are alike.

Since much of their value is based on, more or less, subjective assessment, it is difficult to make a sound determination on the price of any one diamond at any one time.

Another complication is the fact that the diamond industry is unregulated. As such, unfair treatment abounds, and insiders in the market will do what they can to lock out outsiders. Jewelers will often charge double the worth of a diamond on the wholesale market to sell a piece to an outsider.

That’s why if you are planning to trade diamonds, you should go through a diamond trader who is an expert in the area. Of course, you will have to find one you can trust, which in itself is a challenge. You will also need to get a laboratory grading certificate and make sure that is legitimate as well.

Diamonds are also quite expensive to purchase because they may be subject to regional taxes that can be quite hefty. And once you own a large amount of diamonds, you may want to insure them against lost or theft. That will cost you even more money.

All of that is money you will need to make up along with the initial price you paid before you can even begin to profit later. And that all assumes the price of the diamond continues to go up and that you paid a fair price to begin with.

What’s the bottom line? If you really know what you are doing, go ahead and invest in diamonds. In other words, if you yourself are a diamond trader or you are absolutely positive you can trust one, maybe diamonds are a sensible investment for you.

But if neither of those cases applies? You probably want to stay far away from it. Particularly because the value of your diamonds is dependent largely on marketing and market control and not because of rarity. Diamonds may be the hardest minerals on the planet, but there is no such thing as an unbreakable or risk-free investment.

The diamond market is unregulated, and there are huge barriers in place against outsiders trying to invest. There are a lot of smarter investment choices you can make that are more accessible to the average person, and with a better chance to be profitable.