DMIA

Are Diamond Rings an Investment?

There are plenty of arguments for and against whether diamond rings are an investment. The general consensus is that diamond rings are not an investment. In fact, there is plenty of argument and support to discredit the myth of a diamond being having any re-saleable value at all.

What is an investment?

Some believe that you can hock a diamond ring when hard times fall, and as such see monetary resale value. However, let’s first understand the definition of investment. Merriam-Webster dictionary defines investment as, “the commitment of funds with a view to minimizing risk and safeguarding capital while earning a return” (http://www.merriam-webster.com/dictionary/investment).

A Greater Fool

We can generally agree a diamond ring does not appreciate in value unless you can find a fool out there who will pay more than what you paid for, then congratulations, you have managed to turn a profit.

This is no different from holding a garage sale and selling your used books and toys for more than what you acquired them for. It’s a slim chance, but still possible.

Why was it once valuable?

Indeed in the early 19th century, diamonds were a rarely acquired gemstone. The general consensus is that what is scarce is valuable. Later on, De Beers company acquired monopoly rights for mining diamonds, purchasing mines around the world, and maintaining price control of the market.

Today, that is no longer the case, so there is greater competition on pricing for this commodity.

A Regal Engagement Ring

What about Princess Diana’s ring? Prince William was able to propose to Kate Middleton with his mother’s engagement ring thereby saving the cost of having to buy one himself!

One could argue that an engagement ring can serve as future cost saving measures by being passed down to the next generation as an heirloom. No cost savings for Prince Harry like his older brother unfortunately!

A One-Time Purchase for Generations

Considering the average American marital age for young couples are between 28 and 35 after years of schooling and crippling student loans, not everyone necessarily has a few big ones lying around in the bank to splurge on a luxury piece.

So being able to propose to your life partner with the engagement ring your mom or grandma had would have great sentimental value, and definitely a cost saving from an economic perspective. One could even argue that buying a diamond engagement ring is investment for future sons in the family to secure the girl of his dreams!

Not a True Investment

Considering the true definition of investment, we must acknowledge the monetary exchange for a diamond ring is not an actual investment. A diamond ring does not appreciate in future value, or yield a monetary profit from a financial point of view.

There are investment-like benefits in another sense of the word, such as investing in love and Investing in your future lineage. A diamond engagement ring serves as evidence of a clearly tangible signal of commitment translated through an expensive purchase.

References

https://smartasset.com/personal-finance/why-a-diamond-engagement-ring-is-not-a-good-investment

Related Articles: