Are Lab-Grown Diamonds a Good Investment?

Much has been made about the low resale value of lab-grown diamonds. Their lower cost relative to mined diamonds is one of their selling points, but along with that lower price comes a lower resale value. And if their resale value is lower than that of mined diamonds, lab-grown diamonds must not be a good investment. But the fact is, this problem isn’t unique to lab-grown diamonds. Mined diamonds, and gemstones and jewelry in general, don’t have much resale value. Loose diamonds aren’t a great investment either, as their price is volatile and they do not reliably appreciate in value.

Luxury jewelry is a major purchase, but it is not analogous to buying a house. Most of us buy a house not just to have shelter from the elements, a comfortable place to rest, and somewhere to keep our stuff; we buy a house as an investment, under the assumption that it will be worth more in 20 years than it was on the day you purchased it.

We see our house as an investment, and the same could be said about some hobbies. You might collect first-edition books, vintage guitars, fine wine, rare coins, or works of art with the understanding that having these objects not only gives you a sense of satisfaction now but a source of income later. If you have some disposable income and you’re not interested in investing in the stock market or reliable assets like gold bullion, copper, or land, these kinds of investment will be fun now and put money back in your pocket later.

There are other costly purchases we make that we don’t expect to appreciate in value. When you purchase a luxury car for $50,000, you don’t expect to sell it in five years for $80,000. At best, its diminished value will cover the down payment on your next car. But the fact that a car depreciates in value the second you drive it off the lot is not really a factor in whether or not you buy a car. You buy a car first of all because unless you live in a dense urban area with great public transportation, it’s just a necessity of modern life. But if you’re going beyond the basics of getting from point A to point B, you are considering the happiness a certain car will bring you: how comfortable it is, how nice those heated seats are in winter, how fun it is to drive, how good the stereo sounds, how nice it looks, how it might communicate something about your personality and taste, how great a family road trip will be. The same is true of a boat, a 90” 4K UHD TV, or a designer suit or dress.

No one views a new car as an investment. It ought to be the same with a diamond. You buy a diamond ring because it’s beautiful and because it serves as a symbol of a relationship meant to last a lifetime. If you’re planning on spending your life with someone, why would you worry about an engagement ring’s resale value, or even what it’s going to be worth tomorrow? It will still be just as beautiful and meaningful whether the price of diamonds goes up or down.

If you’re just looking to buy loose diamonds as an investment, you’ll run into a different set of problems. When you buy a diamond at retail price, you’re paying more than it’s worth. Retailers buy diamonds from wholesalers, who in turn buy them from manufacturers, who ultimately buy them from mining companies. The marked-up price of a new diamond includes the services of everyone involved in the supply chain, as well as the costs of paying employees and rent. And when it’s time to sell that diamond, you’ll receive less than it’s worth. The jewelers or the coin and gold buyers you’re selling that diamond to need to make a profit themselves, so whatever they pay you for it will be significantly less than what they will turn around and sell it for.

Another factor to consider when investing in diamonds is the volatility of the diamond market itself. Diamond prices rose steadily throughout the early 2000s until the 2008 recession, then increased quickly before falling again in the 2010s. Prices are rising again, but they’re still not back to pre-pandemic levels. And even when diamond prices were rising sharply after the 2008 recession, they still lagged far behind gold, silver, and platinum, all much more reliable investments. In the retail sector, diamond prices are dropping, and only the top luxury brands—companies like Tiffany and Bulgari—are seeing price increases. In those cases, prices are reflective of name brand status rather than the actual market value of their diamonds.

In the future, though, anything can happen—and that’s the problem with viewing diamonds as an investment. Increasing demand amid tightening supplies could see the price of diamonds rise. Lab-grown diamonds might also upset the mined diamond market in unpredictable ways. So it’s not just that lab-grown diamonds are a poor investment. Diamonds in general are an investment fraught with risks, and they are certainly not something you can purchase and quickly flip for a profit. You’ve got to be in it for the long haul, and you have to have an understanding of the market and the industry as a whole if you are to buy and sell at the right times. Diamonds do not appreciate in value, and resale prices are always lower because the jewelers buying used diamonds are also looking to make a profit. So rather than buying any type of diamond as an investment, it’s best to focus on what a diamond means to you now: an enduring symbol of a lifelong relationship, or a luxury purchase meant to be enjoyed.