The Diamond Pro

Are Diamonds a Valuable Purchase?

By Michael Fried
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A diamond is a valuable purchase for a few reasons: it maintains its beauty, it’s durable and long-lasting, and it retains some value for resale. For centuries, diamonds have been sought after for engagement rings and other jewelry, and the trend doesn’t appear to be stopping anytime soon. For those who enjoy the look of a diamond, such as this beautiful 1.20ct cushion cut from Blue Nile or this perfectly shaped pear shape diamond from James Allen and plan to wear it for many years, a diamond is a sound investment.

As a standalone venture solely for making money, buying a diamond is not a wise investment. The resale value of a diamond is significantly less than its original price. The price of diamonds fluctuates in the economy just like any other high-end good. Sometimes diamonds increase in value, while other times they decrease. Regardless, pre-owned diamonds sell for slightly less than their original prices.

In most cases, a diamond has a resale value of 20-60% of the original price paid. For instance, if a new diamond costs $4,000, you’ll likely be able to resell it for anywhere between $800-2,400, depending on a few factors. 

So, diamonds maintain some of their value and you can resell them, but don’t expect to make money or break even.

A DIAMOND’S RESALE VALUE

The resale value of a diamond is lower than its original retail price and depends on a few factors.

First, when you buy a diamond, the seller adds a retail markup to the price. As a seller, they have to cover their costs and make a profit, so they mark up the price of their diamonds. For some vendors, especially bricks and mortar stores, their markup can be as high as 100%. For other vendors, such as online sellers like James Allen and Blue Nile, their markup might only be 20% because their overhead costs are much lower. 

Second, the type of diamond you buy and its qualities impact how much you can resell your diamond for. Diamonds with excellent Clarity, Color and Cut will be easier to resell than a diamond that performs poorly in these areas. 

Third, where you resell your diamond impacts how much you’ll get for it. For instance, Abe Mor out of New York will offer you more than you would earn on a site like eBay.

Keep in mind that people don’t usually buy diamonds in hopes of making a profit or breaking even. When most people buy diamonds, such as for an engagement ring, the goal is to have beautiful jewelry that’ll be cherished for years to come. From that standpoint, diamonds can be money well-spent, regardless of resale price.

Rose gold diamond engagement ring from Blue Nile
A rose gold halo diamond engagement ring from Blue Nile

All that said, we don’t believe in spending as much on a diamond as what clever marketing schemes have led many to believe. For example, we don’t recommend spending two months’ worth of salary. Instead, we recommend looking at your financial situation and your partner’s ring desires to determine how much to spend on an engagement ring. The amount you spend on a diamond doesn’t represent the size of your love, or how likely your partner is to say ‘yes’ to a proposal.

6 WAYS THAT DIAMONDS OFFER VALUE

Diamonds are stunning, rare and extremely durable. They offer value beyond their price, and it’s important to consider these aspects when deciding if a diamond is a valuable purchase for you.

  • Significance. A diamond is a significant purchase, and part of what makes a diamond so special is that it’s undeniably unique. Every natural diamond has a backstory dating back billions of years. A diamond is a symbol of lasting love and romance. 
  • Rarity. Although diamonds aren’t very rare inside the earth, natural diamonds that are beautiful enough for use in jewelry are rare. This rarity is a key part of what contributes to their value.
  • Long-term value. The market price for natural diamonds has increased tenfold since 1960. If these trends continue, a natural diamond will likely appreciate over time (after dropping from its retail price).
  • Durability. Diamonds are the hardest mineral and rate a 10 on the Mohs scale of hardness. Even if you wear your diamond every day for 50 years, it’s likely to remain in good condition, as long as you properly care for your ring
  • Beauty. A high-quality diamond gives off unprecedented brilliance and fire. Diamonds have long been beautiful, cherished gemstones. Diamonds can be cut into an array of shapes and can be set in rings ranging from halos to solitaires
  • Importance as an heirloom. Since a diamond is a long-term purchase, its value as an heirloom is often just as important as its price in the short term.

    A diamond will always hold significance. It’s a treasure that can be passed down to your children and grandchildren and be kept as a family heirloom.  

Ultimately, every diamond buyer has different priorities. If the factors above are important to you, a diamond is a great choice.

DO DIAMONDS DECREASE OR INCREASE IN VALUE OVER TIME?

Diamond prices fluctuate just like other high-end goods and resources. Since the Great Recession ended in 2009, diamond prices have increased slowly but steadily. In general, diamonds don’t increase significantly in value. Your diamond might sell for slightly more if diamonds have a higher market value at the time, and it might sell for slightly less if diamonds have a lower value at the time.

After retail markup, inflation and what vendors will pay for a pre-owned diamond, any diamond you buy will not increase in value over time. It will simply only retain some of its value.

RESELLING YOUR DIAMOND

If you decide to sell your diamond or diamond ring, it’s important to know how much you might get for it. Diamonds do have resale value. What you’ll get, though, is probably 20-60% of what you originally paid, depending on a few factors. 

natural round diamond
0.60ct Natural Round Cut Diamond from James Allen

No two diamonds or potential buyers are the same, so there’s not a standard calculation that can be used to assess resale value of your diamond. 

Your diamond’s resale value depends on:

  • Where you bought your diamond: When you buy a diamond from a jewelry store, you pay market value for the diamond along with the markup of the retailer. The markup margin depends on the vendor. Online vendors, like James Allen and Blue Nile, have much lower overhead costs, and therefore, a lower markup than bricks and mortar stores. Buying a diamond online can save you a significant amount and can also help you maintain a higher resale value on your diamond. 
  • How much your diamond is worth: The Cut, Carat, Clarity and Color of the diamond all impact how much the diamond is worth and how desirable it is. The certificate that comes with your diamond also affects its value. A GIA or AGS certificate are the most reliable and reputable lab certs. A high-quality diamond with a certificate from the GIA or AGS will garner more than a low-quality diamond. 
  • Where and how you sell your diamond: There are companies that buy pre-owned diamonds, like Abe Mor. Certain vendors pay more than others. Abe Mor often provides the best offer, usually 10-20% above what other vendors will pay. 

A LESS EXPENSIVE ALTERNATIVE: LAB-CREATED DIAMONDS

If you’re looking for a less expensive stone than a natural diamond, consider lab-created diamonds. Synthetic diamonds are man-made diamonds that have the same chemical and optical properties as natural diamonds. When looking at them with the naked eye, there is no visual difference. 

In general, lab-created diamonds are usually 25 to 60 percent less expensive than comparable natural diamonds. While they cost less than natural diamonds, lab-grown diamonds don’t retain any resale value. In addition, the market price of lab-created diamonds continues to decrease. For example, it’s possible that if you buy a lab-created diamond today, a similar lab-created diamond might sell for significantly less next year. 

When looking at lab-grown diamonds vs. natural diamonds be sure to compare a few key elements, including price, look, sustainability and resale value.

Think You’re A Diamond Pro?

Both of these are beautiful 1.01ct H VS2 Excellent cut diamonds
One is lab created and costs $1,250
One is mined and costs $4,940
Can you tell which is which?
Choose the diamond you like better and see if you are a pro!

LAB-CREATED DIAMONDS AND VALUE RETENTION

From a financial perspective, the key difference between a lab-created diamond and a natural diamond is value retention.

lab-created diamond cushion
1.01ct Lab-Created Cushion Diamond from James Allen

When explaining value, it’s helpful to remember Warren Buffett’s famous quote: “Price is what you pay, value is what you get.”

Lab-created diamonds are cheaper than natural diamonds at the time of purchase. When you look solely at the purchase price, a lab-created diamond will often look like a better deal than a natural diamond. 

However, over the long term, the difference in price becomes less significant and the difference in value becomes more significant. Natural diamonds will retain more of their value than lab-created diamonds.

Natural diamonds are valuable for several reasons. First, they’re immensely desirable. Although lab-created diamonds are growing in popularity, most diamond buyers are happy to pay a small premium for a stone that was created naturally.

Second, although natural diamonds aren’t hugely rare inside the earth, they’re significantly rarer than lab-created diamonds. There’s a limit to how many diamonds can be mined, whereas there is theoretically no limit to the number of diamonds that can be produced in a lab setting. 

These factors, as well as several others, all have an effect on the respective resale values of lab diamonds and natural ones. 

This is where the price vs. value difference becomes clear. For example, let’s say you purchase this lab-created 1.35 carat, ideal cut, I color, VS2 clarity diamond for $1,990. If you ever decide to sell it, most jewelers won’t be interested in purchasing it back from you. 

In comparison, if you buy a natural diamond like this for $2,040 from an online vendor such as James Allen or Blue Nile, you’ll generally be able to get 50 to 60 percent of its original price back should you decide to sell it in the future. This is simply the nature of the market for lab-created diamonds. Since they’re readily available and easy to produce, the open market simply doesn’t value them as highly as natural diamonds. In addition, you’re likely to see the price of lab-created diamonds go down, while diamond values remain pretty consistent.

WHICH ARE MORE VALUABLE – NATURAL OR LAB-CREATED DIAMONDS?

From a value perspective, a natural diamond will lose approximately 50% of its value immediately after purchase, but a lab-grown diamond will lose all of its value. On the other hand, though, a lab-grown diamond is at least 50% cheaper than a comparable natural diamond.

lab-created emerald diamond
1.03ct Lab-Created Emerald Diamond from James Allen

To decide which is more valuable to you comes down to a personal question of what you want. Do you want a rare, natural diamond that maintains some of its resale value and status? Or do you want a less expensive lab-created diamond? 

While diamonds shouldn’t be seen as a financial investment, a natural diamond will retain some value, status and rarity over the years. If this is important to you, opt for a natural diamond and learn more about the 4Cs. If you’re tighter on your engagement ring budget, you might opt for a lab-grown diamond instead. 

If you’re unsure, contact one of our experts to help you decide which is the better purchase for you.

CONCLUSION

Natural diamonds have resale value, meaning you’ll get some money back if you sell your diamond in the future. They also have value in terms of their beauty, durability and significance. Learn about what to look for in a diamond by reviewing our detailed buying guide which covers everything from cut and shape to color and clarity. By choosing a high-quality diamond, your diamond will be worth more now and in the future.

If you want a less expensive alternative, consider a lab-created diamond. You won’t reap any resale value, but your initial price point will be less. If you decide on the lab-created route, we highly recommend buying from a reputable online vendor such as James Allen. With James Allen, you can find high-quality lab-created diamonds that are certified. 

About the author
Michael Fried
Mike learned the diamond business from the ground-up at Leo Schachter Diamonds - one of the world's top diamond manufacturers. He has been recognized as a diamond industry expert by Time, PeopleMoney, The Daily Mirror, NerdWallet, The Times Herald, Yahoo Finance Australia, The Art of Charm, The Washington Diplomat, The Next Web, and more.
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James Allen James AllenJames Allen is the leader in online diamond sales. Their imaging technology is the same as inspecting a diamond with a jeweler's loupe. They have the largest exclusive loose diamond inventory online and fantastic prices. They also have the nicest collection of lab created diamonds online. Save 25% off Engagement Rings during James Allen Summer Vibes Sale.
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Blue Nile Blue NileBlue Nile is the largest and most well known internet jewelry seller. They have a very large exclusive online inventory. Their high quality images are catching up to James Allens' and their prices are amazing. Blue Nile have generously offered our readers an exclusive one-time use coupon. (Click Here to save $100 off orders of $1000 or more)
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