Although diamonds are generally pretty hard to find in the open – when it comes to selling them on the free market, the troublesome part of finding them is settled entirely. Regardless of their price, diamonds are easier to buy and sell than to find in the wild.
Buying diamonds as jewelry is one thing. But to look at these gems as a means of investing is an entirely different thing.
When it comes to investing in diamonds, there are a couple of things that you need to understand; the first thing being, do diamonds appreciate or depreciate?
Unfortunately, diamonds are prone to depreciation. But certain diamonds can bypass this rule!
What’s that rule, though? And which diamonds can avoid depreciation? How can you tell if your diamond will depreciate or not? Can you do something to postpone or negate the reality of diamonds’ depreciation process?
Don’t worry. As long as you commit to this article, all your questions will be answered. If you wish to invest in diamonds, we highly recommend that you continue reading, as we guarantee that some things listed below will blow your mind!
Is It Wise To Invest In Diamonds?
As time passes, nearly everything that originated from nature will either cease to exist or gradually decompose under certain circumstances. It’s the process of life.
Fortunately enough, diamonds are durable enough to withstand anything that might try to harm them. It seems they’re immune to the passage of time, too.
That doesn’t mean that these gems won’t meet their highest peak and their lowest low like everything else does, though. But in the case of diamonds – and, more specifically, their value – that peak isn’t obtainable when you find them, but rather when they are sold for the first time.
Most goods, regardless of how expensive they might be, will have the highest price tag when they are put on the market for the first time. Diamonds didn’t avoid this reality.
But there’s a slight yet oh-so-important difference here. Materials like gold and silver will hold their value even after they are sold.
The precise value of particular objects is determined by the established rules of the free market, where nearly all retailed items, once sold, will have their price tag lowered by a certain degree.
If we’re discussing gold, the value will remain relatively unchanged, regardless of when you bought it.
But what about diamonds? Are diamonds durable enough to resist the passage of time and the harsh reality of the free market?
We won’t judge you if you answer incorrectly. Oddly enough, most people nowadays aren’t familiar with the topic at hand and rush to the conclusion that diamonds appreciate over time.
Unfortunately, the previous statement isn’t correct. Nearly all diamonds, regardless of their origin and characteristics, will depreciate.
A keen eye won’t miss the term “nearly” here. Later, we will discuss which diamonds can bypass the depreciating reality of these precious stones.
For now, we need to dissect why diamonds aren’t something that you should consider a wise investment in the long run.
Regardless of how expensive your new diamond might be, its overall value will decrease immediately – as soon as you buy it and leave the store with it.
Why is that happening? Aren’t diamonds holding their value firmly over time?
For you to understand why diamonds depreciate, we need to explain the rules of second-hand retailing.
Learn More: Is Buying A Diamond A Good Investment?
People Like To Buy Unused Diamonds!
It’s a rule of thumb that you need to buy a new diamond ring before proposing to your beloved future spouse. But, for you to have the ability to charm her, you’ll need to present her with a new and shiny golden ring embedded with a large diamond.
If you believe that buying a second-hand diamond ring before proposing is a good idea, then you’re mistaken in more than one area.
First of all, genuine diamonds are usually only sold in jewelry shops that are accredited and considered trustworthy.
That means that all jewelry presented in that jewelry shop is made from pure and natural materials. There are no fake stones or metals available for sale in jewelry shops.
Many of these jewelry shops won’t even consider second-hand retailing jewelry, as they’ll need to label them as second-hand products. That alone is enough to decrease its overall worth exponentially; most people wish to buy first-hand goods.
So, if you’ve bought a second-hand diamond ring because you’ve hoped for a lower price, then congratulations. But be sure to stop by your local jewelry shop and have them run some tests.
Unfortunately, most second-hand retailed diamonds are fake or won’t have a certificate proving their legitimacy. Because of that, most people primarily avoid buying previously-used diamonds, as their retailers usually can’t verify their origin and legality.
Second, people usually have a tendency to be attracted to unique objects – especially if no one used them in the past. Diamonds are susceptible to this reality, as people will seek them in overly-glorified jewelry shops that can guarantee they’re legit and brand new.
With that out of the way, we can begin to dissect the reason behind why most diamonds depreciate.
Learn More: Why Is Diamond Resale Value So Low?
What Determines The Value Of Diamonds?
Most people who aren’t familiar with the diamond-making industry will conclude that diamonds are expensive because they are rare. And that common misconception is further influenced by the fact that people like to expand their knowledge using – well, the Internet.
Let’s shatter the lies and reveal the truth: Although the overall rarity aspect somewhat determines diamonds’ value – diamonds’ worth is primarily determined by the 4 C’s of diamonds.
Before they are put on the free market, all diamonds have to undergo a process in which professionals test their characteristics – which are fundamentally described as the 4 C’s of diamonds.
They stand for clarity, carat, color, and cut of a diamond. Depending on how well it’s cut, how heavy it is, how transparent it is, and which color it is, a gem will be handed a proportional price tag.
If you wish to learn more about the 4 C’s of diamonds, click on the link here! With that in mind, you now have a vague idea of what determines the value of all diamonds.
But, just like most things on the market, diamonds will lose their value over time – especially if they undergo a second-hand retailing process.
Why Are Diamonds So Pricey In The First Place?
It’s reasonable if this is the first question that popped in your head after reading all of the previous things. The diamond-mining industry is a pretty complicated business network.
But, when it comes to explaining why diamonds are so expensive – there are no problems with that.
When a diamond is dug up somewhere, it’s recorded in documents, which contain the origin of that diamond, its initial weight, and data on the exact time when that diamond was found.
After that, diamonds are transported to professional cutters that reshape all diamonds before being sold in jewelry shops.
Take a look at some of your diamonds – they will, most likely, be cut in a familiar shape.
Granted, jewelry shops can sell uncut diamonds, too – but only if you make a specific request. Besides that, diamonds that are embedded in gold and platinum jewelry will always be cut to perfection.
The tricky part starts when the diamond arrives in the jewelry shop. All jewelry stores – especially big box jewelry retailers – will raise the price tag of their diamonds by a staggering 100% to 200%.
That’s what’s known as inflation.
To keep things as simple as possible:
Jewelry shops buy diamonds directly from the manufacturer, paying less as jewelry shops usually buy more than one piece. By doing so, they are offered to buy them for less money than what you might believe is the case.
Then, as soon as they place them behind thick glass and display them in their shops, they considerably raise the price of these jewelry pieces – especially those embedded with diamonds.
By doing so, they are making substantially more money than what they initially needed to pay for those diamonds. Sooner or later, someone will come by and pay for a piece of jewelry – that part’s inevitable given that it’s how retail works.
Sometimes, you might think that you have just landed an excellent deal from the jeweler. But in all honesty, a jeweler will always sell first-hand diamonds for at least twice the money they used when they paid for that same diamond.
And just like that, an average retail circle with diamonds ends: The diamond-making industry is satisfied for selling a lot of diamonds at once, and a jewelry shop is pleased to have bought them for far less and then sold them for far more.
Then, there’s the individual customer who bought a diamond for a far greater price than the original direct-sale price.
Here’s a quick tip: Don’t try to fight reality. Diamonds will always be sold like that – and this cycle won’t cease to exist anytime soon.
So, after all of this, we can conclude that diamonds heavily depreciate over time, especially if you intend to sell them to the same retailer.
But, what can you do to enhance or stabilize your diamond’s value as much as possible?
Certain things can be beneficial if you wish to avoid the depreciation of your diamonds – but more on that below.
Take Care Of Your Diamonds Properly!
Regardless if you want to sell your diamonds one day or not – you should still take care of them as much as possible.
Although diamonds are the hardest natural material in our world, they still need to be treated well – even more so if you wish to preserve their value.
Depending on the circumstance, it might take a single unintentional hit in the wall to manifest a crack somewhere on your diamond. They might be extremely hard.
But if you hit a diamond in one of its cleavage patterns, then you’ll break your diamond. And that’s going to lower the value more than you realize.
Sell Your Diamond To Someone New
As we’ve previously mentioned, try avoiding selling diamonds to the same retailer that sold you the piece.
And when you do attempt to sell it, it’s highly recommended that you have a certificate that can prove the legitimacy of your diamond.
That certificate will state where the diamond was last sold – among other things – especially if that place was a jewelry shop. If the retailer notices that they sold you the diamond, they’ll offer you a considerably lower amount of money.
That diamond might be in mint condition. But the retailer will precisely determine why you’re trying to sell that diamond – and most likely offer you a smaller amount of money for it.
Try selling your diamonds somewhere else.
The Uniqueness Of Your Diamond
If you remember, we stated that nearly all diamonds depreciate over time.
Oddly enough, some diamonds bypass that rule – and will hold onto their original price tag firmly.
Those diamonds are usually unique stones that offer a rare and exclusive set of characteristics – whether it being a perfectly transparent look or an odd color, some diamonds can avoid the depreciation process.
We don’t wish to discourage you, but those diamonds are mainly stones well-known to the diamond-making industry, possessing specific names that describe their unique origin.
So, try to stick by the previously mentioned tips on how to preserve the value of your diamond as much as possible – because it’s safe to assume you won’t get your hands on one of these gems.
Read Also: Will Diamonds Lose Value?
Sooner or later, most people will consider investing in precious materials to achieve financial security. One possible alternative that’s exploded in popularity these days is investing in diamonds.
But is that a good idea? Do diamonds appreciate or depreciate?
Well, we’re afraid you’ll have to accept the fact that nearly all diamonds suffer from depreciation. Regardless of their origin and value, most gems found will be targeted by a malicious inflation protocol, where the jewelry shops buy them for low and sell them for high.
Luckily, there’s a way to amortize the consequences of diamond depreciation – to a degree, anyway.
The first thing you should do when you buy a piece of jewelry embedded with diamonds is to request the certificate of those diamonds. Try to hold onto it without losing it.
But, the essential thing that you should remember here is to protect your diamonds.
Despite them being extremely durable, it’s optimal to present a stone that suffered next to no damage when reselling on a second-hand market.
Only then can you somewhat preserve the overall value of your diamond!
See Also: Will Lab Diamonds Hold Their Value?