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How To Buy an Engagement Ring That’s Actually a Good Investment

Engagement rings are very expensive, so it’s no wonder that one of the most common questions people ask is “are diamond engagement rings an investment?” In most cases, the answer is a simple no. However, if you buy the right kind of gemstone, it most certainly can be.

More and more savvy investors are buying high quality diamonds and gemstones because they see it as a strong and wise long-term investment. Understandably so, as the proof is in the pudding. By looking back decades at the prices of diamonds, sapphires, rubies and emeralds, we can see a constant rise in value. So, if gemstones can clearly be an investment, all you need for an engagement ring to be an investment is an investment-worthy diamond or precious gemstone! What makes a diamond an “investment diamond”? This is exactly what we are here to discuss…

IS AN ENGAGEMENT RING AN INVESTMENT?

While the vast majority of engagement rings in the market are not investment worthy, and are bought solely with sentimental value in mind, some engagement rings absolutely can be considered an investment. It is as simple as this…any engagement ring with a large, high-grade diamond or gemstone is a true financial investment. You are simply mounting an investment-grade gemstone onto an engagement ring so that the investment can be worn. It’s an investment that will appreciate over time and that you can appreciate day in and day out. 

ARE DIAMONDS A GOOD INVESTMENT?

It all depends on the diamond. A good 1 carat diamond will typically get 50% of its retail value at resale if it was to be resold shortly after buying it. That’s obviously not a good investment. However, if you waited many years, the diamond’s price will increase, eventually surpassing what you bought it for. Diamond prices have consistently increased by 14% each year since 1960, with a yearly compound interest of 4.3%. Although past performance doesn’t guarantee future performance, it has been holding strong for over a half of a century. The point is, if you hold, even your average 1 carat diamond can be considered an investment. Nevertheless, it’s far from an interesting and highly profitable one. 

All things considered, we are not here to talk about your typical 1-2 carat good quality diamond, as that is more of an emotional investments (unless you were to buy in bulk). It is not really a financial investment, regardless of if it appreciates in value or not. 

If you want an engagement ring that is truly an investment, you need to think bigger and better. 

High quality, sizable diamonds and gemstones are without a doubt a form of investment. Wealthy people all over the world buy and hold gemstones, just like they do gold. Although the price is not as cut and dry with gemstones as it is precious metals, the value of gemstones, like precious metals, has steadily risen over the past few decades. Moreover, gemstones have been a form of currency for hundreds of years. It is clearly a safe place to put your money. 

What’s more, gemstone investments have some other advantages and benefits, like ease of storage, and, put simply, there is a very powerful feeling you get having rare and beautiful gemstones in your possession. You simply won’t get the same feeling with a 1 carat diamond that you do with a high grade 10 carat diamond. The fact of the matter is, they are significantly more rare, so the value is so much higher.

All in all, a diamond or gemstone can be a great investment if you know what to look for. If it wasn’t an investment, then you wouldn’t see diamonds and gemstones selling for exorbitant amounts at auctions…

Gemstone Records at Auctions:
  • Pink Star Diamond: 59.60-carat oval mixed cut diamond sold for 7$1.2 million in 2017
  • Rockefeller Emerald: 18.04 carat emerald sold for $5.5 million dollars in 2017. It was bought in 1930 for a fraction of the price. 
  • The Orange: 14.82 carat orange diamond sold for $35 million in 2013
  • D-color diamond: A 28.86 carat D-color diamond sold for $2.1 million at an online-only auction in 2020. 

There are, of course, many more examples. 

It’s also important to note that the gemstones don’t have to be 20+ carats to be considered an investment. You may not buy a diamond or gemstone that is worth millions of dollars, but a 5+ carat gemstone can easily fetch 6 digits in 2021. Imagine what it will be worth in the future…

If the past is any indication, a large, high-grade diamond will significantly increase in value. And as it is an expensive highly-valuable diamond, the percentage of increase that we see in diamonds over long periods will be very considerable. On top of that, you get to wear it and enjoy it all the while. 

If you want a true family heirloom, you need to get an engagement rings with an investment grade gemstone.

ENGAGEMENT RINGS THAT ARE ACTUAL INVESTMENTS

Now, let’s go over what to look for when buying an investment-worthy engagement ring (or loose diamond for an engagement ring), so that some day you can pass on an heirloom ring worth tons of money. 

We are going to discuss white diamonds, fancy colored diamonds, and the big 3 precious gemstones (sapphire, ruby and emerald). 

GIA CERTIFICATE 

GIA stands for the Gemological Institute of America. It is the most prestigious and reputable gem lab in the world. They protect buyers of gems by ensuring they know exactly what they are buying. A GIA certificate will contain all of the information you need to know about the gemstone. 

If you are buying a diamond, sapphire, ruby or emerald, you must always look at the GIA certificate first and you want to keep that GIA certificate forever. Never buy an expensive gemstone without a GIA certificate and never lose your GIA certificate as you will need it if you ever plan to resell it. If the gemstone or engagement ring is passed down in your family, make sure the GIA certificate comes with it.

Note: While there are other gem labs out there, GIA is the only one you want. 

A GIA certificate will tell you the carat weight, cut grade, color grade, and clarity grade, as well as other specific information like dimensions, origin of the gemstone, and more. Let’s focus on the 4Cs as they pertain to investment grade gemstones, because they are the most important. 

WHITE DIAMONDS

For a white diamond to be considered an investment, it needs to be rare, and the fact of the matter is, small white diamonds are not really rare at all. 

What is extremely rare are high grade sizable white diamonds. So, here are some minimum requirements for a white diamond to be considered “investment worthy”. 

Carat Weight

High grade diamonds of a few carats and up are quite rare and they hold value well. The best colorless (aka white) diamonds to invest in are 3-5+ carat diamonds. Overall, the larger the diamond, the greater the value. 

Cut

Cut is one of the most important factors as it dictates the fire and sparkle of the diamond. The cut will significantly influence the value. Cut gradings are ranked as Excellent, Very Good, Good, Fair and Poor. Investment grade diamonds will always be in the Excellent to Good range. 

Color

For white diamonds, colorless is best. Color ranks from D-Z, with D grade being the best, signifying a diamond with no color. D color grade diamonds are very rare, especially diamonds of larger carat size. If you want a diamond engagement ring that doubles as an investment, your diamond needs to be D-H in color. This will give it the highest value and best chance of appreciating quickly. 

Clarity

Although clarity is the least important of the 4Cs for those who are buying engagement rings without investment in mind, it is an important factor for investment. Clarity grades are as follows: Flawless, Internally Flawless, Very Very Slightly Included, Very Slightly Included, Slightly Included, Included. For investment diamonds, it’s best to get a diamond that is Flawless or Internally Flawless, and Very Very Slightly Included if the other grades of the diamond are high. 

Shapes

The best shapes for diamond investments are round, oval, square, and radiant as they are the most desirable and brilliant. 

FANCY COLOR DIAMONDS

Over the last few decades, fancy color diamonds have proven to be the best of all diamond investments. They are less volatile and they have been dominating the market with high prices. They are said to have the best long term growth potential. 

Fancy color diamonds – of which pink, red and blue are the top choices, followed by orange, then yellow – are exceptionally rare. As such, they will have greater value than white diamonds of a larger size and similar quality. 

Like white diamonds, fancy colored diamonds are graded on color, clarity and cut as well. However, color has a different grading system. 

As the points above regarding clarity, cut and carat weight for white diamonds apply to fancy color diamonds, we will only look at color grades for fancy color diamonds. 

Color Grades

The grading system for fancy color diamonds Fancy Light, Fancy, Fancy Dark, Fancy Intense, Fancy Vivid, and Fancy Deep. 

With fancy color diamonds, the higher the intensity of the color is the more the diamond will be worth. Typically speaking, Fancy Intense, Fancy Vivid, and Fancy Deep are the best for investments. However, Fancy Light, Fancy, and Fancy Deep diamonds are still very valuable as well. 

Note: Due to the Argyle mines closing in 2020, which was the world’s largest pink diamond mine, pink diamonds have seen a huge spike in value. This mine accounted for 90-95% of the world’s pink diamonds, as well as a significant portion of the yellows and ultra rare reds. 

As desirability plays a significant role in the investment of diamonds, it is important to note that pink and yellow diamonds are extremely popular. Because of this, over the past 20 years, the price for yellow and pink diamonds has increased by 500 percent. 

Related: Investment Grade Diamonds: Colorless & Fancy Yellow Engagement Rings

PRECIOUS GEMSTONES

Like fancy color diamonds, sapphires, rubies and emeralds are considerably more rare than white diamonds. That said, it depends on the quality of the stone in question. With most jewelry, white diamond jewelry will sell for more than sapphire, ruby or emerald jewelry. However, when comparing really good quality sapphires, rubies and emeralds with comparable diamonds, the colored gemstones will be more expensive and valuable.

Over the last few decades, these precious gemstones, which are known as the Big Three Gemstones have spiked in value. When good quality, these rare gemstones are immensely desirable. Most of the world’s gemstone records at auctions involve sapphires, rubies or emeralds (as well as fancy color diamonds). 

Now, determining the quality of a precious colored gemstone can be a little more challenging than white diamonds, as the grading system is less intricate. Nevertheless, if you buy a sapphire, ruby and emerald, it should have a GIA certificate that will tell you what you need to know. 

With sapphire, ruby and emerald engagement rings, you need to look at the 4Cs just like you would with a diamond.

Ideally, you want a gemstone that has a vivid color, strong saturation, very minimal or no inclusions, and a large carat size. If you can find this at an affordable price, you will have just made a bonafide investment. 

Read more about sapphires, emeralds and rubies and how they are graded. 

ENGAGEMENT RINGS THAT ARE NOT INVESTMENT WORTHY

Most engagement rings that you find at big box stores like Kay Jewelers, Zales, and Jared, are not an investment. They are cookie cutter mass produced engagement rings with insignificant diamonds. These stores cater to the average buyer, and the average buyer wants an affordable to semi-affordable ring. These rings, while relatively affordable, are extremely over priced. They are not even close to an investment. 

If you want a diamond that will potentially appreciate in value: 

  • Avoid any gemstone under 1 carat. 
  • Don’t go lower than H color.
  • Don’t go lower than VS clarity.
  • Get a diamond with an Excellent cut or Very Good cut.
  • Choose a round brilliant, square or oval diamond, as they are the most popular shapes.

Even then, you really can’t consider the minimum requirements above to be an “investment”. You can just be sure that these types of diamonds will hold value.  

Investments vs resale is not the same thing. If you want a diamond that will be easy to resell, you don’t actually want a high grade diamond. A G-I color, VS clarity, 1-2 carat diamond will be easiest to sell as they are good quality (perfect to the naked eye) but they won’t have a super high price tag like a D color IF 2 carat diamond would. You get a bigger bang for your buck with these kinds of diamonds, so most people look for this mid-to-high grade range. By going for a diamond like this, you make it more obtainable to the average person, which means you’ll have a much broader target market. Moreover, jewelry stores will be more inclined to buy them from you on the spot as they know they can easily sell a diamond like that.

With all that said, it’s far from an investment. If you want an investment diamond, you need to go for really good quality large white diamonds, fancy colored diamonds or precious gemstones. And more importantly, you need to strike a good deal in the first place. Our tip is always “BUY AS LOW AS POSSIBLE”.

At Diamonds By Raymond Lee, we have the most competitive prices for diamonds, gemstones, and engagement rings. Our selection of loose gemstones includes some exceptionally rare and exquisite diamonds, sapphires, rubies and emeralds. If you want an engagement ring that doubles as an investment, we have you covered. 

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