Do you all think diamonds are a bad investment long-term?

[cian]

I just ran across this article I thought I'd share and wondered what your thoughts were. I do not have any desire to purchase diamonds as an investment - only as an engagement ring - but I do wonder if we are buying at their peak price. It seems like there are a lot of indications that in 10, 20, or 30 years that we may regret spending so much today.

Article: Why diamonds are a poor investment

 

[diamondseeker2006]

Re: Do you all think diamonds are a bad investment long-term

You never look at jewelry as an investment, particularly an engagement ring. I think if a person is ready to become engaged, they should buy what they can afford at the time. I don't think it is a good idea to postpone marriage because of diamond prices.

Diamonds that can be upgraded are a great idea in the event that prices should fall, though. You get full credit for the price paid for the original stone which would work in your favor if prices were down when you were ready to upgrade.

 

[cian]

Re: Do you all think diamonds are a bad investment long-term

Wow good point about the upgrade thing! Do you really think that places like Whiteflash and etc would honor the trade-in policy if say all diamonds lost 50% of their value across the board? I've never read the terms & conditions that closely.

 

[suchende]

Re: Do you all think diamonds are a bad investment long-term

I don't think of diamonds as an investment any more than I think of designer purses as an investment.

 

[kenny]

Re: Do you all think diamonds are a bad investment long-term

We pay retail but have to sell at wholesale.
So much for the investment.
Even then, if you hold it for decades it may increase in value enough to break even.
It may not.

Diamonds could go up or down in value.
There was a peak in diamond prices a few decades ago.
That really sucks for people who bought back then.
Nobody knows for sure what diamonds, or any "investment", will do in the future.

I think some diamonds are okay to be considered a small part of a diversified long term portfolio.
It's a hard asset that can preserve some wealth if the stock market crashes.

I suspect not all diamonds will change value the same over time.
I suspect the most rare and large ones will appreciate a higher percentage.

There is a rare circumstance in which diamonds are vastly superior over any other form of wealth . . .
Diamonds are groovy if you have to flee for your life from political persecution.
You can sew quite a bit of wealth into a seam of a garment compared to gold, which is heavy.

I have a friend who's family fled Vietnam and their diamonds helped them start a new life in the USA.

 

[Imdanny]

Re: Do you all think diamonds are a bad investment long-term

Richard Taylor and Elizabeth Burton paid "steal" prices if you look at how her best pieces appreciated in value- at that level of the market, at least in my lifetime, people who were buying the truly "important" pieces certainly made great investments. Whether that's true today, I wouldn't have any way of knowing. Sometimes you can look at a price and you just know it's ridiculously low. There is a spinel necklace stamped with the name of Shah Jahan that sold at Christies for a little over a million dollars some years ago. It is a truly historic and magnificent necklace. I've seen "nothing" spinel necklaces compared to this one at over a million dollars recently. As far as buying diamonds in the "normal" size (weight) and color ranges, like most everyone else says, I would never view them as an investment. My personal feeling is that long term value accrues to gems and jewels that are the most rare. To me this would exclude "normal" diamonds.

 

[Tuckins1]

Re: Do you all think diamonds are a bad investment long-term

I don't buy diamonds as an investment. I buy them to enjoy them now. You will never get your money back when re-selling a diamond, so what's the point? Just wear them and enjoy the sparkle!

 

[Trekkie]

Re: Do you all think diamonds are a bad investment long-term

I think diamonds are a great investment in my personal happiness. Every time I see a sparkle, I smile.

That's a great return on my investment!

Certainly don't feel the same way about stocks!

 

[Pandora II]

Re: Do you all think diamonds are a bad investment long-term

Stones over 7cts in high colour and clarity and decent sized FCD's will hold value well I believe. Also extremely fine pieces of branded jewellery.

To be honest, coloured stones are a far better choice as they are so much rarer - as long as you are buying at below trade and know what to invest in and are happy to sit on it. Extra-fine Paraiba tourmalines (think $50k/ct), sapphires and rubies are worth it, and I would guess that Mahenge spinels and tsavorite garnets in large sizes and premium colours will apreciate nicely. On the other hand if they discover a massive new deposit of any of them next week the price could drop massively and you would be left sitting on some very now expensive baubles.

Your average 1-3ct white diamond is a very poor investment unless you need something portable to cash in in an emergency and you don't mind getting anything like what you paid for them.

 

[y2kitty]

Re: Do you all think diamonds are a bad investment long-term

What hasn't been a bad long term investment over the past 10 years? Housing? Stocks? The interest rate on my savings account? Plan for the future but enjoy life now (with sparklies) without having to justify it to yourself as an investment.

 

[merilenda]

Re: Do you all think diamonds are a bad investment long-term

I think diamonds are a great investment in my personal happiness. Every time I see a sparkle, I smile.

That's a great return on my investment!

Certainly don't feel the same way about stocks!

Exactly how I feel!

 

[AmeliaG]

Re: Do you all think diamonds are a bad investment long-term

You could have come to the same conclusion just by reading threads on Pricescope. I've read some of the same statements here.

What surprised me (not so much about the article but from what I read here previously on Pricescope) was the performance of very well cut cubic zirconia. A few members who've had diamonds a long time (and should know their stuff) have posted that they really couldn't tell the difference between a very well cut cubic zirconia and a diamond.

That would give me pause. But Pricescope has done such a good job of convincing me not to pay for quality I can't see. I was ready to go in the near colorless range and look for a diamond with an inclusion that could be hidden by a prong because I can't see it, you know? But the fact that a cubic zirconia can sparkle as much and be colorless and totally clean for less really makes it hard to justify paying for a diamond.

I'd lstill ike a diamond not a cubic zirconia even if I couldn't see the difference. I don't like fake stuff. I guess at the end of the day, diamonds are not really practical; but then that may be part of their appeal.

 

[Amys Bling]

Re: Do you all think diamonds are a bad investment long-term

I don't buy diamonds as an investment. I buy them to enjoy them now. You will never get your money back when re-selling a diamond, so what's the point? Just wear them and enjoy the sparkle!

Ditto.

 

[Lady_Disdain]

Re: Do you all think diamonds are a bad investment long-term

Like Pandora said, I think that colored stones maybe better investment stones, but, even so, I don't buy them as investments but as luxury.

My Mahenges have gone up in price a lot and I might come out ahead with spess. I was able to buy them very early on, before the price jump on both. But, to do that, you have to be update on finds and what makes a good investment gem (color, color and durability). I certainly didn't make money on other gem purchases.

The best place for a return on investment is, in my opinion, very fine jewelry and gems: true luxury brand names and the artists who are pushing aesthetic boundaries with high quality pieces. For example, Andrew Grima pieces from the sixties and seventies.

 

[fleur-de-lis]

Re: Do you all think diamonds are a bad investment long-term

Since most of the things we buy lose 90%+ of their value the minute we buy them, the optimist would point out that diamonds hold their value far better than most items.

(Anyone here want to buy my 2001 top-o-the-line Toshiba laptop computer? A five year old BCBG dress? This pair of sunglasses I bought on Venice Beach?)

 

[suchende]

Re: Do you all think diamonds are a bad investment long-term

We pay retail but have to sell at wholesale.
So much for the investment.
Even then, if you hold it for decades it may increase in value enough to break even.
It may not.

Diamonds could go up or down in value.
There was a peak in diamond prices a few decades ago.
That really sucks for people who bought back then.
Nobody knows for sure what diamonds, or any "investment", will do in the future.

I think some diamonds are okay to be considered a small part of a diversified long term portfolio.
It's a hard asset that can preserve some wealth if the stock market crashes.

I suspect not all diamonds will change value the same over time.
I suspect the most rare and large ones will appreciate a higher percentage.

There is a rare circumstance in which diamonds are vastly superior over any other form of wealth . . .
Diamonds are groovy if you have to flee for your life from political persecution.
You can sew quite a bit of wealth into a seam of a garment compared to gold, which is heavy.

I have a friend who's family fled Vietnam and their diamonds helped them start a new life in the USA.

Of course, we don't have to pay retail. If you only buy at a price you think you could unload it at, from the secondary market, I suppose you would earn gains reflecting inflation, subject to cut preferences that change over time.

 

[diamondringlover]

Re: Do you all think diamonds are a bad investment long-term

I dont buy diamonds for investment, I buy them because I love them!!!

 

[iLander]

Re: Do you all think diamonds are a bad investment long-term

Well, all I know is that my hubby paid $2000 for my 1 carat RBC ring on our 10th anniversary.

It's now worth about $5000, 15 years later.

As investments go, it's not a huge return. Just over 6% compounded, if I'm figuring that right. But they do tend to keep a bit ahead of inflation, and you get to wear them.

You'd look silly with a stock certificate around your neck!

 

[Lula]

Re: Do you all think diamonds are a bad investment long-term

Well, all I know is that my hubby paid $2000 for my 1 carat RBC ring on our 10th anniversary.

It's now worth about $5000, 15 years later.

As investments go, it's not a huge return. Just over 6% compounded, if I'm figuring that right. But they do tend to keep a bit ahead of inflation, and you get to wear them.

You'd look silly with a stock certificate around your neck!

Yes, the prices of some diamonds (1 carat or more in carat weight; good color and clarity and decent cut) do go up over time; however, they are illiquid assets and difficult for individuals to sell at a profit. For example, if you tried to sell the diamond that you paid $2,000 for 15 years ago (that is now worth -- retail -- $5,000) you would probably receive about $2,000, if you sold it through Pearlman's or Erica Grace, for example, because you'd need to factor in their commission. So not much in terms of appreciation, if anything, on your original investment. If you sold it on your own through the site-that-cannot-be-named, you *may* be able to get a little more than that, but not much. Ebay -- who knows? Maybe more; maybe not.

You also need to factor in the opportunity costs of purchasing a diamond 15 years ago instead of another investment that may have had a higher return. And, most important, with any investment, you need to consider "carrying costs" of holding the gem -- the most obvious one is any insurance premium you paid to cover the stone over the past 15 years. Another carrying cost could be the cost of the setting, which is typically not worth much in resale, and may be a loss if it cannot be sold/re-used.

Diamonds are not an investment unless you are in the very small group of people who are buying large, important stones, and, even then, they, too have to pay someone to sell the stone(s) for them if they need to unload them for some reason, and they also are paying rather large insurance premiums on these "investments" -- carrying costs again.

To be fair, stocks and bonds, antiques, rare coins, real estate, etc., also have opportunity costs and carrying costs, and can also be illiquid in that you need a specialist or middleman to help you unload them.

If you are hoarding diamonds because you believe the world economy is headed for a collapse, and we're all going to be hunting and foraging in the woods, carrying around guns because there is no police force (or one that can be trusted), well, then, diamonds may be a good investment; however, this scenario assumes that there are people left, post-financial-apocalypse, who have the money to buy your diamond investments from you. Or people left who will trade bread and other foodstuffs for your diamond investments so you can eat.

On the other hand, it's probably not possible for a diamond to be "too big to fail" and require a bailout, like some of the investment banks that ran into difficulty a few years ago -- talk about bad investments. Those people who held on to their American auto company stocks, though, probably feel pretty good about now, along with any of us who were smart enough to hide some Swiss francs under our mattresses.