With the recent decade or so of precious metals, such as gold and sterling silver, having tremendous value, many people are looking at precious jewels, such as diamonds or rubies, as potential investments. At first glance, they seem to be a pretty reasonable investment; jewels and precious stones are concrete investments that will not be squashed like stocks or bonds, but they are not great investments for a number of reasons.
We’ve talked with professionals from Diamond Buyers International about the situation. They frequently hear people disappointed with quotes based on what they paid for their diamond, but there’s good reason for that.
Firstly, if you are buying diamonds at a retail establishment, the mark-up is ridiculous. On average, a brick-and-mortar jewelry store selling diamond jewelry can be marked up as much as 100%. This is primarily due to the lack of turn-over at jewelry stores, many of which only turn their stock once a year. Even purchasing “wholesale” diamonds can be pricey, as the Rapaport Diamond Report has a cushion built in so that jewelers selling un-set diamonds can still get a small profit.
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Remember that diamonds also come in a variety of colors, grades, and cuts. Diamond Sellers Guide has a wealth of information on the different varieties and pricing of each.
Secondly, the value of precious stones and jewels is not as easily determined as the value of precious metals. Gold and silver are primarily valued according to their weight, and the market standard gives a dollar value to each troy ounce of the metal; this allows the value to be easily determined and almost the same anywhere you go. Jewels and precious stones have more subjective value, where personal biases are more important than any inherent or market value of the stone.
It’s not that diamonds and other precious stones don’t have inherent value or don’t maintain their value through the years; it’s that their value can vary significantly at various buyers and sellers, the market doesn’t have an empirical and subjective way to determine that value, and many jewelers sell their stones at an exorbitant mark-up. For these reasons, diamond jewelry is not the best investment to make. It would behoove an investor to look into markets such as gold or silver instead.