Is Buying Your Love a Diamond Engagement Ring Really A Good Investment?
Man (not to forget the ladies) has had an obsession with gold for hundreds and thousands of years, but diamonds are a relatively newly acquired taste. Like most gemstones and precious metals, diamonds come expensive as they are high in demand and relatively rare to find. But a diamond can be rendered worthless if the demand for it stops. It’s demand might stop else where in the world, but not for many young American men and women who wish to enter into the promise of marriage with a diamond engagement ring.
Why are we Americans spending thousands of dollars and much of our savings on a few tiny pieces of carbon? To quote Sheldon from the TV series The Big Bang “just because there is some carbon with their atoms stacked neatly, I cannot be expected to hand over thousands of dollars.” We feel you Sheldon, we feel you!
Diamonds – a Man’s best friend
For those who believe that diamonds make for a good investment, there are plenty of reasons for them to invest in it:
* They don’t take up room- unlike bulky gold or silver, diamonds are a small item and one can easily store diamonds worth $1 million and more in the smallest safes and vaults.
* They are durable- as one of the hardest substances known to man, we do not have to worry about it breaking, corroding or wearing off. We just need to be sure not to lose it!
* Inflation resistant- like real estate, gold and silver, diamonds generally appreciate with inflation but one key difference from the others is that diamonds are easily movable and more durable.
* Psychological factor- unlike stocks, shares and other financial investment tools, diamonds are physical; in that you can look at it, hold and even mount it onto jewelry to wear. It feels like a safer investment.
And this does make sense to us but there are some strong arguments against purchasing and investing in diamonds. One of them being that in the prime of most men’s lives when they are earning well and starting to save up, possibly for the future and retirement, many feel compelled to trade it all to get their beloved a diamond ring. Societal pressures and expectations dictate that every woman must be given a diamond ring if they are to get engaged. So what is a fella to do? Read on weary men…
Let’s not call diamonds an investment
This commonly believed myth floating around is that diamond rings, and diamonds in particular, are a good investment option. Well it was before the late 1800’s when they were rare to find and were mostly mined from few sources in India. But then man just went right ahead and found more diamond mines and that’s how diamond became more abundantly available in the market. So why is the price of diamond still so high? Blame it on the DeBeers Mining Company which have purchased practically all the diamond mines across the world and because of the monopoly they enjoyed, controlled its prices. Although this monopoly ended in 2001, prices still stay at those highs.
You’re buying a depreciating asset
Much like any car, diamonds are also a depreciating asset, as its value steadily decreases the second you purchase it. Now when we compare this to buying gold or silver, the market for them is highly fungible and liquid as it can be easily traded later on, stored as coins, or even sold quickly as there is always a demand for it. Gold and Silver cab actually act as a buffer against inflation as the cost appreciates and gold/silver gets costlier to buy. Sadly, that’s not the case for diamonds, as it remains to be a nearly non-liquid investment.
The heartache of selling a diamond
Did you know that there is a general 100% to 200% mark-up on the store prices of diamonds, and that a majority of the stores will not entertain buying back these stones from the people who bough it. Why? One of the reasons is that they do not want to make a small offer to the customer, as it would shatter the illusion that diamonds are a good investment. One industry expert illustrates this by pointing out that you may purchase a $2,000 ring from a retail jewelry store, but it’s resale value would only be worth $600.
So if you’re just a young couple, very much in love, you might want to reconsider shelling out a small fortune for a diamond ring, all thanks to DeBeers and their sky-high prices. In view of the pros and cons, when seeing diamonds as an investment, the cons definitely outweigh the pros. Yet, if you or your ladylove are into diamonds and bling, there’s nothing wrong in buying them in order to wear it as jewelry. Just, please don’t call it an investment!
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