written by VJ
Do Diamond Rings Hold Their Value?
Today, we are going to talk about one of the hottest topics. Which one has a better financial value: lab-grown diamonds or earth-mined diamonds? There definitely is a winner, and we’re going to reveal it in this article.
Before we dive in, we want to help you guys understand. And if you have been researching this, you’ll know what we’re talking about.
There is a marketing war that is going on between the mined diamond and lab-grown diamond community. And it makes it very difficult because a lot of the information out there is biased.
Here at Engage studio, we offer both mined and lab-grown diamonds. And we want to use this blog to tackle this topic in an authentic and transparent way.
These are the things that we’re going to cover in this article:
- Do mined diamonds hold their value?
- How do lab-grown diamonds hold value compared to mined diamonds? (If we’re just talking about financial value, we find one option is superior to the other.)
- A safety net here at Engage Studio, regardless of whether you go with a mined or a grown stone.
Alright, so let’s dive in
Do Mined Diamonds Hold Their Value?
Before we answer that, let’s just prep this up.
So if anything should hold its value, it should be a diamond, right? It’s the hardest substance on earth. You could spend your entire life wearing it, pass it down, and it will be in the same condition as when you got it brand new.
We don’t like to be the bearer of bad news. But unfortunately, 99% of diamonds do not hold their value. Okay? It is an astounding NO. The reason has nothing to do with the stone. But instead, it has to do with us, our feelings and emotions. It’s the psychology behind it.
The #1 reason why they don't hold their value is because of the psychology behind them.
The vast majority of us do not want to buy a diamond second-hand. We bet that if you are looking to get engaged and looking for a diamond right now, you’re most likely not going to pawnshops, eBay, or any other second-hand listing site. You don’t want a second-hand diamond. You don’t want someone else’s no to be potentially their yes.
But those who want a second-hand diamond most likely got that garage sale mentality and looked for the best deal.
Here's one thing about valuing diamonds: it's a smoke fog. It…is…a…marketing charade.
The number one reason people sell their diamonds is not that you have car troubles or this expense is coming up. No. (And if you try to pawn your wife’s ring, that’s the best way to end up in the doghouse.)
The number one reason people are selling it is because of a BREAKUP.
Think about it. Breakup, engagement ring, divorce. The last thing you’re going to do is ask your friend: “Hey, how much did you make from your ring?” or “Did you make money from it?” Nobody asks that. Most people just want to move on if they’re in that situation. I mean, they’re not even thinking about it, right?
The other thing is that many people selling the ring are not necessarily the people who bought it. Maybe they received it from their partner. Again, the cost thing is not something that they prioritize. Some studies have been done with mined diamonds. And it is found that if you’re trying to sell it, you can expect almost a 40% reduction, on average, from its original price.
Losing more than that is expected. It has nothing to do with the stone but how well you negotiate with your buyer.
Case in point. If you look at classified ads, you will probably find something like, “Paid $10,000, willing to part with it for 6. My loss, your gain.” You’re going to just see that all the time. The only exception would be a mere 1% of the mined diamonds that will hold or even gain value. These are considered investment-type diamonds.
An example would be the natural pink diamonds, where 90% come from the Argyle Mine in Australia. The mine is currently closed, so there’s a good chance that we will not see the really fine pink stones ever again. Because the stones are so rare, they will go up in value. However, the people investing in those stones are the same people who might be investing in fine art, like a Picasso.
But that’s not what we’re really thinking about for most of us.
Do lab-grown diamonds hold their value?
There are two ways to look at this. One, we can look at the resale value of lab-created diamonds. And then on the other, we can look at the price of lab-grown diamonds in general. Will the prices drop for them?
So can you resell your lab-grown diamond for something? The answer… we’re not 100% sure. But here’s the thing:
Anything with a resale value has a demand for it.
The need for lab-grown diamonds has grown exponentially over the last few years.
There is definitely a demand. But coming back to the number one reason people sell them is they break up. And lab-grown diamonds have not been on the market long enough that there isn’t enough supply out there.
So not to be pessimistic, but if you wait long enough, you’re just going to have many more people that break up, get divorced, and put them on the market. There will be some value, but we just don’t know how much. There’s not enough data to tell yet. Are they going to retain similar percentages as mined diamonds do? We don’t know, but they will have some.
Another interesting question is about the price drop. So people will say something like, “Well, if we can grow them and they’re just growing from carbon, we can grow as many as we want, right?” or “Isn’t the value going to make them worthless at some point?” That sounds good in theory, but the answer is no. And here are some reasons why.
The main ingredient to growing a diamond is energy.
You need a lot of energy to run these reactors. And, unless you see energy costs come down dramatically, you’re not going to see the cost of growing lab-grown diamonds decrease.
#2: If you're looking at a diamond's cost, you have to look at the breakdown.
There’s the raw material cost of the rough stone and the cost of cutting the diamond. The cost of cutting mined and lab-grown diamonds is basically the same. And from there, a percentage will come from the cost of the original rock, whether be it mined or lab-grown.
You will get to a point where the raw material price will decrease. But still, you’re not going to get the same amount as the end product because it’s just how the law of diminishing returns works.
However, one thing that interests us is that the price of lab-grown diamonds has decreased dramatically. Ten or fifteen years ago, they were more expensive because few people could produce gem-quality diamonds.
Now they’ve come down a lot. Market pricing is actually working. Like supply and demand, the demand has shot up like crazy over the last couple of years, there are way more suppliers growing them, and the prices are coming down.
However, for mined diamonds, the price doesn’t come down. It is because the supply is more controlled. They slowly put some raw stones on the market. It is fascinating but, at the same time, part of a marketing ploy.
Now let's get back to the financial value.
Which one holds more financial value, lab-grown diamonds or natural earth-mined diamonds? There is a clear winner—and it is lab-grown diamonds!
We’re going to use a scenario to paint this out.
So let’s just say you got a budget to spend up to $10,000 for a mined diamond. Meanwhile, you will get the same thing in a lab-grown diamond for around $4,000. And, let’s say, over five years, something has happened. And you’re probably going to sell your mined diamond for approximately $6,000. In this case, you lost about $4,000, or 40% of its original value.
But with a lab-grown diamond, you can buy it for $4,000 and set aside the remaining $6,000 for something else (like investing the money). After the same five years, you can pay off your diamond. However, you also earn interest from investments. So that’s why the lab-grown is superior to the mined when it comes to financial value.
Let us talk about Engage Studio’s safety net
We offer a lifetime trade-up, whether you get a lab-grown diamond or natural earth mined diamond. So what does that mean? Your diamond will retain the same value as when you first bought them.
Our favourite part of the Engage trade-up policy is that you can switch from a lab to a natural, a natural to a lab. It really takes the pressure off because both diamonds, whether it’s a lab or a natural, will retain 100% value with us.
In the end, let's be real here
You purchase an engagement ring, not from a value perspective. But more from your intention, your sacrifice. It’s about your gift to the one that you love. And you really want to consider, what would your partner love? So when you’re ready, reach out to us, and we’d be happy to start the conversation.
