Natural Diamonds and Resale Value
There is an age-old notion that diamonds appreciate in value over time. Beginning in the late 1800s, diamonds were exceedingly rare, however, when the mid-twentieth century brought about the discovery of new diamond sources, the diamond’s value decreased with the increase in supply. The only reason the price of diamonds remained high at that point was because the DeBeer’s company held a monopoly on the diamond industry, which prevented other companies from pricing competitively.
The truth is, diamonds actually depreciate in value by 30% of the purchase price as soon as you walk out of the jewelry store door. Unless your diamond is exceedingly rare, by the time you want to sell it back, you’ll be lucky to get half the price you paid for it. Most stores don’t even buy back diamonds from consumers because they can buy identical diamonds from wholesalers without laying out money in advance.
The DeBeer’s monopoly may have ended in 2001, but the legacy lives on. Diamond sellers are still selling customers on the myth that their diamonds will end up turning a huge profit so the sellers can justify the high prices of the diamond. In reality, the idea of selling a diamond as an investment is not a reality at all.
What You Should Look for When Buying a Diamond
Now that the old school idea of buying a diamond as an investment is finally being laid to rest, there are new school ideas about buying a diamond. Today, we look at the diamond’s intrinsic value, the innate beauty, and the happiness it brings, rather than the amount of money we may or may not receive for it. Now, the emphasis is on getting the best value for your money today, not betting on its future return.
The Rising Popularity of Lab-Created Diamonds
With this new attitude on buying diamonds comes a shift in the diamond industry. The lab-created diamond is a diamond made without concern for its resale value, but its present value.
Lab-created diamonds are real diamonds in every way. They have the identical physical, chemical, and optical properties; the only difference is that they are grown in a lab, not in the earth. This cuts out a lot of time and a lot of unpredictability.
Instead of waiting for Mother Nature to create the conditions ideal for natural diamond growth, scientists can recreate them in a lab using a carbon seed. Diamonds are the rarest minerals on earth, carbon one of the most frequently occurring. As a result, lab-created diamonds can be sold for 30% to 40% less than natural diamonds, making them a great value for today.
Lab-Created Diamonds and Resale Value
Traditional jewelers will tell you that lab-created diamonds have no resale value, but with the low return on diamonds today, the initial savings can compensate for it.
Consider buying a natural, one-carat diamond and paying $6,000 for it. According to Zoara buying guides, this is the average price of a diamond. Had you bought a similar lab-created diamond, you would have paid 30 to 40 percent less for it, which would be about $3,600. That’s a savings of $2,400. If you sell back the same natural diamond, you can expect to get about 20% of its original value, which would be $1,800.
Putting the math together, the natural diamond buyer would have a net loss of over $4,000, plus no diamond. The buyer of the lab-created diamond would have a net loss of $3,600 plus a diamond that he or she loves.
When it comes to the worth of a diamond, lab-created or otherwise, the only standards for value are the 4C’s: Carat, Color, Clarity, and Cut. Thinking of diamonds as investment pieces is simply an antiquated notion.
How Much is A Lab-Created Diamond Worth?
If you ask a traditional jeweler, he’ll probably tell you a lab-created diamond is worth nothing. He’ll tell you that the value of a diamond is determined by its rarity, and because lab-created diamonds are not rare, they’re worth nothing. This could not be further from the truth.
Lab-created diamonds are things of beauty. Of course they have worth. Just like natural diamonds, the worth of a lab-created diamond varies from diamond to diamond. No two diamonds are alike. Also, like natural diamonds, the worth of a lab-created diamond is determined by the 4C’s (minus about 40 percent).
Carat Weight of Lab-Created Diamonds
One of the most common misconceptions about the diamond carat is that it refers to the size of the diamond. Carats, in fact, refer to the weight of the diamond. Thus, a diamond with a shallow cut can look bigger than a diamond with a higher carat weight, costing less. This can make carat weight an important consideration when looking to get the best bang for your buck.
Another thing about carat weight that surprises most customers is that prices per carat jump exponentially at certain benchmark weights: ¼ carat, ½ carat, ¾ carat, and 1 carat. Therefore, a .99 carat rock will cost significantly less than a 1 carat stone. The difference in the weight of the stone may be easy to ignore, but the weight of your wallet will be noticeable.
Color of Lab-Created Diamonds
Most of us think of diamonds as having no color. Ideally, they don’t, but then again, we don’t live in an ideal world. When natural diamonds are subjected to the extreme conditions required for their growth, impurities leak, giving the diamond a yellowish tint. The same is true of lab-created diamonds. Lab-created diamonds are also created under extreme conditions and take on color in a similar fashion.
The GIA Color Scale is the measure of the amount of color, or lack thereof, the diamond displays. It rates diamonds on a scale from D-Z. The highest-grade diamonds are considered colorless. These fall into the D-F category. These diamonds are extremely rare and can fetch fortunes.
As the alphabet goes up, the value of the diamond goes down. In diamonds falling below a K rating, the yellow tint is too noticeable for the diamond to be considered of much value at all. As a result, the color grade of a lab-created diamond is an essential part of determining its worth.
Clarity of Lab-Created Diamonds
Another important part of determining a lab-created diamond’s worth is its clarity. When natural diamonds form below the Earth’s surface, the high pressure and high-temperature conditions can take their toll. This toll often results in imperfections in the diamond, also known as flaws. Exterior flaws are called blemishes; interior flaws are called inclusions. These flaws can affect the way the diamond reflects light, which is a major part of the diamond’s overall appearance and consequently, their price.
When lab-created diamonds are grown, inclusions and blemishes form as well. The GIA Clarity Grade Scale assigns diamonds to categories based on the number, location, and nature of these inclusions. Diamonds with the least number and least noticeable of flaws receive the highly prized Fl (Flawless) designation. Like colorless diamonds, these, too, are quite rare and are priced accordingly.
As the inclusions become more noticeable, the clarity grade goes down. Most diamonds on the market fall into the VS (Very Slightly Included) or SI (Slightly Included). Included diamonds (I) may have flaws that block light to the point of opaqueness. These are the least desirable diamonds and are not often found on the retail market; when they are found, the prices are relatively low.
Cut of Lab Created Diamonds
It would be difficult to imagine a diamond without its sparkle. The light a diamond reflects is arguably its best feature. Without it, a diamond might look like nothing more than a piece of highly polished glass.
Many would argue that cut is the most important of the 4C’s because it is responsible for the sparkle of the diamond. Cut refers to the way the proportions of a diamond can be manipulated to achieve maximum light return.
The GIA Cut Grading Scale is based on a five-point system: Excellent/Ideal, Very Good, Good, Fair, and Poor. Excellent or Ideal cut diamonds have an equal balance of light and dark areas. This is the optimal cut for maximizing a diamond’s shine. As the ratings go down, the light and dark spots become increasingly asymmetrical. In fair and poor cuts, the fire and brilliance are so greatly reduced, most are not sold on the market.
Lab-created diamonds are also graded on the GIA cut grading scale, and the better the cut, the more you’ll pay. However, it may be worth it. A proportioned cut will allow the light to travel through the diamond in a way that will boost the other 3Cs.
The upshot? The days of buying a diamond as an investment are over. Diamonds are no longer valued for their future worth, but their current worth. When it comes to buying a diamond, the 4C’s are what really matter, and not in terms of how they will help appreciate the diamond’s value. This makes buying a lab-created diamond one of the soundest purchases you can make.
What’s more important? How much your diamond is worth monetarily, or what it’s worth to you? Is there any reason not to buy a lab-created diamond?
