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Are Diamonds A Good Investment?

Tags: diamond

Diamonds are not a good investment

Diamonds are not as precious as they used to be

Deemed as a girl’s best friend, diamonds have been traded in the market all over the world as luxury jewelry due to its scarcity. Did you know it takes an average of 250 tons of mined ore to produce one carat of finished diamond?

Unlike precious metals such as gold or platinum, gem diamonds do not trade as a commodity. There is a substantial mark-up in the sale of diamonds and there is not a very active market for the resale of diamonds. Nonetheless, the industry has reported that it is going through tough times as people are reluctant to buy diamonds these days.

In Malaysia, diamonds are usually associated with wedding rings which is a similar concept that is shared by most parts of the world. However, there seems to be a fall in demand towards the diamond jewelry in the market. In a recent report by The Economist, the price slump in diamonds has been pushed by the oversupply of diamonds caused by a slump in consumer demand in China.

“That has dragged prices of top-quality cut diamonds down from about $12,000 per carat to $7,400 in five years, according to Rapaport-RapNet Diamond Trading Network, a price index,” the news firm added in the report.

Though diamonds are cheaper in the market now, people are still not tempted to buy it. Here’s why:

Diamond rings

Millennial are not fond of wearing diamonds as fashion accessories

The mindset where owning diamonds defines ones’ wealth and social status is not as impactful as it was during our parents and even grandparents era. The younger generation has been exposed to advancements in technology during the digital era, where things change rapidly including personal preferences and consumer behavior.

Instead of buying jewelry, gold or tobacco, young people these days are shifting their preference towards life-purpose fulfilling activities in spending their money. Things like travelling, Apple products and fashion are more appealing to them when compared to buying a diamond.

By now, most of middle-income Malaysians have realised that it is not practical to wear an expensive piece of rock just to look good when there are other more affordable jewelry items available in the market. Even buying a car or an iPad is deemed more practical than buying a diamond ring which has no contribution for an individual’s life routine.

On top of that, diamonds have been slowly left out in the fashion industry and it is only a matter of time before the concept of having a diamond ring as an essential item for an engagement or wedding is completely wiped off.

Diamond ring: A must in engagement is just a marketing pitch

It is important for consumers to realise that having a diamond ring is essential for an engagement or wedding is a concept created to drive people’s demand for the rock.

A report by The Huffington Post explained the notion of engagement rings being an ancient tradition deeply embedded in the human history is in fact untrue.

“The idea of a diamond engagement ring is roughly a century old. Guess who invented the concept? Not surprisingly, it’s the same people who mined the diamonds — the De Beers diamond syndicate.” The news report explained. De Beers group has a leading role in the diamond exploration, diamond mining, diamond retail, diamond trading and industrial diamond manufacturing sectors, founded in 1888.

Then in 1948, Frances Gerety, a copywriter from N.W. Ayer & Son, the first advertising agency in the United States had a flash of inspiration and came up with the slogan “A Diamond is Forever.” It’s a fitting slogan, because it reminds people of memories, and as such, must stay forever in the family, never to be sold.

By creating a scenario where people need diamonds to complete their wedding ritual, the norm has been widely used in the past 60 years. However, many are realising that it is just a marketing campaign started in the 40s which then became a custom when really it is just a psychological approach of marketing.

Diamonds as investment

Bad choice of investment

The younger generation these days are well aware of the value wealth and asset classes today, and quite frankly, diamonds are not one of the investment vehicles that can drive returns as desired. It is just a high-end retail product.

As of now, the resale of diamonds is not a common practice and therefore, one can hardly see active movement in secondary diamonds which translates into low liquidity of diamonds.  As a result, buying diamonds do not guarantee return due to difficulties of it resell.

In addition, it is not rational to use two or three months’ salary just to buy an expensive diamond engagement ring. It would be smarter to save the money for future, invest in other investment vehicles or even save up for a property’s down payment.

A marriage’s sustainability lies within the couple’s relationship and trust, not a piece of shiny rock. However, making the right financial decision lies within your knowledge and ability to implement the knowledge. So be a smart consumer and avoid buying things that won’t do you good!

The post Are Diamonds A Good Investment? appeared first on Financial News, Reviews and Advice.



This post first appeared on CompareHero.my Financial News And Advice, please read the originial post: here

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