According to Martin Rapaport, chairman of Rapaport Group and the RapNet Diamond Index, “Until the Securities and Exchange Commission approves such a fund or ETF, U.S. investors are largely limited to buying and selling physical gems, typically through a dealer. But whether considering a fund, ETF or physical ownership, "it's a sucker's bet" to get involved in the diamond trade unless you know what you're doing.”

Buying and Selling Stones

As the demand for investing in diamonds has increased, there has been a sound increase in the price of both rough and polished gems. In fact, Sotheby's, which is one of the world's largest brokers of fine and decorative art, jewelry, real estate, sold a 74.79-carat white diamond for $14.2 million after a competitive bidding that took above its pre-sale estimate of $9 million to $12 million. Even Christie's sold a pear-shaped, 101.73-carat rock for $26.7 million.

A report from Bain Capital has recorded that between the years 2010 and 2011 the sale of diamonds across the world has increased by 18 percent, with maximum contribution coming from India and China. However, in 2011 the supply of diamonds contracted by 3 percent, due to which the cost of rough diamonds increased by 31 percent, while the price of polished stones rose to 24 percent.

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