Diamonds are generally a disastrous investment, particularly for non-experts.

There are many reasons for this, but I will give here the major ones:

• Liquidity is bad. When you get a gem appraised at its retail price you get a practically meaningless number. Don't believe me? Get a gem appraised and then try to sell it to the dealer, his offer will be a quarter (if that) of the price he just gave you a certificate of appraisal for! A jeweler isn't going to pay retail when he or she can pay wholesale prices, which are generally only a fraction of retail. Forget about selling back to a professional because you will lose a fortune, the best you can hope to do is offload on an amateur somehow.

• Fakes and forgeries abound, and even if the gem is real an expert may spot microscopic flaws like cloudiness and little cracks or impurities that affect the value tremendously. Unless you are an accredited jewel expert you can forget about finding these problems yourself, so you'll have to trust the diamond merchant. You can be almost certain that someone is going to take advantage of you and sell you a rock that looks to the untrained eye fine but is in fact second rate. I suggest you avoid diamond and gem investment unless you happen to actually be a professional with a loupe stuck permanently to your eye.

• What market does exist has huge spreads on purchase and sell prices. The best price to buy may be twice as high as the best price to sell, you will need massive capital gains just to break even.

• Lets just pretend for a minute that diamonds really do go up so much that you can sell profitably at the offer price, sales commissions from brokers are pretty big, you'll need to wait a while longer.

• Markets are tightly controlled by a few organisations, like De Beers. Prices are artificially high, because there are vast stockpiles of diamonds just sitting around potentially able to flood the market. We have already mined far more diamonds than mankind will ever need, only industrial diamonds are consumed and need constant replacement, but these are cheap and plentiful and there are many synthetic substitutes.

• Diamonds pay no dividend, they just sit around waiting for someone to steal them, so you need expensive security and insurance for your "investment".

• Despite what some marketer just told you, diamonds have been a terrible investment historically, appreciation rates are low to negative with the exception of a few cyclical moves from time to time.

• Diamonds have aesthetic appeal and may be an effective currency at winning over members of the fairer sex, but are otherwise an appalling investment, failing on virtually every ground, including liquidity, performance, risk, volatility and income.

• There are people that make money in diamonds, they are professional diamond brokers, usually from old European families with a tradition going back centuries. You can't compete with these guys!

• If you do want diamond exposure, consider buying shares in a diamond mine instead, at least then you'll get dividends and nobody is going to hold you at gun point to steal your latest CHESS statement.