Imagine a scenario. It’s Valentine’s Day. You’re contemplating popping the question to the partner of your dreams, and you want to do it traditionally, with all the bells and whistles. 

But you’re also a very budget-conscious individual – note how diplomatically I avoided the word ‘cheapskate’ – and the prices of diamond rings in the windows of High Street jewellers make your knees go all wobbly. 

You’re currently nursing a coffee in Greggs (Starbucks being too pricey) and ripping your paper napkin into shreds as you ponder the situation.

Is there a way to make your Significant Other feel valued while also getting value for money?

Diamonds are forever

One option is to go vintage, buying a pre-loved (or pre-divorced) engagement ring from a pawn shop or a private seller.

Or if you’re really lucky maybe there’s an old family ring you could use.

Both are good options – but as with any second-hand purchases, it’s a ‘caveat emptor’ situation. 

Vintage rings may be difficult to resize. Typically you can only make a ring two sizes bigger without causing problems with the set of the stone. And people today have chunkier fingers than they did a hundred years ago. So usually you will have to resize an old ring. 

Older diamond rings may have cloudy stones, too. They tend to be less sparkly anyway because yesteryear’s cuts had fewer facets. That doesn’t always fit with modern tastes.

Also old diamonds rarely come with a certificate of authenticity. You have to know what you’re doing – or have access to some pretty sound advice – so that you don’t get sold an imitation. 

Bear in mind, too, that your spouse-to-be may not actually like Great-Aunt Edna’s 1970’s bling. Check before you pass on that heirloom!

But what if you don’t have a family safety deposit box stuffed with precious stones, and you don’t fancy your chances on the second-hand market?

Well, leaping into that gap in the market with a grand “tah-dah!” have come lab-grown diamonds.

What is a lab-grown diamond?

If you don’t know about lab-grown diamonds (sometimes called ‘created diamonds’) then you’re not alone.

Nobody in my little corner of the world seems to have come across them yet. But in other places they’re already ubiquitous. 

Lab-grown diamonds offer an alternative to mined diamonds, and it’s an alternative that has taken off in recent years. The result has been an unprecedented shake-up of the diamond industry. 

You see, a lab-grown diamond is literally indistinguishable from a traditional diamond by anyone but a jeweller with the specialist equipment needed to read the tiny ‘LG’ symbol inscribed on its base. 

Lab-grown diamonds are classified in the same way as mined diamonds. They’re graded in the same way. They offer the same cuts and level of sparkle.

That’s all because lab-grown diamonds are diamonds.

As Sherwood reports:

If you buy a knock-off Rolex on Canal Street in New York, it’s not really a Rolex. It’s lighter, the materials are cheap, and anyone with a Rolex can instantly tell it’s fake.

But a lab-grown diamond has the same chemical composition, physical properties, and optical properties of ‘natural’ diamonds. The only difference is their source.

Basically, the only force keeping so-called natural diamonds’ prices up is consumer perception…

Best of all – and crucially for our hypothetical cheapskate – lab-grown diamonds are a lot less pricey.

No pressure, no lab-grown diamonds

Lab-grown diamonds are cheaper because they’ve passed through fewer hands than mined diamonds – and perhaps because fewer people have been killed to get them out of the ground. Which is nice. 

Marketing materials sometimes refer to them as conflict-free diamonds or ethical diamonds. That’s because unlike many mined diamonds, they don’t come from a war zone and haven’t been used to finance armed conflicts. 

You can therefore feel good about buying a lab-grown diamond, if that’s the sort of thing that matters to you.

Don’t get carried away with the idealism, though. Lab-grown diamonds are made in factories which consume an awful lot of power. It doesn’t always come from sustainable sources. 

Indeed that word ‘ethical’ starts to look a bit flimsy if you examine it too closely.

(Affordable) diamonds are a girl’s best friend

And now the money shot… lab diamonds typically cost less than a quarter of the retail price of mined diamonds (in the UK at least). 

Great! Where do you go to get one?

Well, try the Internet for starters.

There’s been a boom over the last couple of years in online retailers selling the things. They’ll enable you to custom make your diamond ring down to the style of setting, the type of metal, the shape of the stone, and lots of other elements. You can tinker around with an online ring designer tool, adjust carat size, diamond colour, width of band, and do all sorts of other fiddling until you have something that matches your budget and the style that you and your partner favour. 

Some of these retailers even have high street storefronts. There you can make an appointment to check out your chosen styles in person.

And it’s worth checking in with these branches anyway – because sometimes they’ll have a heavily discounted ring that someone ordered but then brought back.

“Usually”, I was told by a salesperson in a hushed voice, looking round to make sure there were no fragile-looking chaps behind her, “it’s because she said ‘no’.”

Diamond in the rough

I found the lab-grown salespeople to be great, probably because they understand that their customers are working to a budget. They’ll clue you in on all the corners you can legitimately cut. 

For instance, you’ll pay more for a diamond with a colour graded towards the start of the alphabet – but there are diminishing returns:

• D is the most prized colourless diamond grade. It’s also the most expensive.
• Anything around F or G is almost imperceptibly coloured, so for most people there’s no point paying extra for a D or even an E.
• Diamonds graded around I or J are noticeably yellower. But increasingly that’s becoming quite fashionable, so you can bag a bargain if you like coloured stones.

The same goes for clarity. There’s no need to pay extra for the top level of clarity unless you’re going to be looking at your ring under a microscope.

Be careful cutting corners on the metal though. 

You can save a lot by choosing a 9k gold band (rather than 18k or platinum) but be aware the white gold variants tend to be rhodium-plated to make the ring extra shiny. When the rhodium wears off – in blotches – you’ll have to send away the ring to be re-plated. That’s likely to be at least once a year, at around £50-£70 a time.

Over a lifetime, it’ll mount up. This is one saving that could prove to be false economy.

Should you become an investor in diamonds?

No. Please don’t. 

I come from a town where ‘investment jewellery’ is alive and well as an asset class. Plenty of folks around here are still sporting sovereign rings – which, incidentally, offer both a portable investment and an edge in a fist fight.

So it goes against my upbringing to say this – but don’t invest in diamonds unless you really know what you’re doing. They are a notoriously tricky investment, for all kinds of reasons.

One reason is that diamonds are fundamentally non-fungible. Diamonds come in a bewildering variety of grades, colours, inclusions and shapes, and the labs which categorise them use different standards. Hence it’s necessary to value every stone on its own merits.

Some people compare diamond buying to property buying, with similar risks and difficulties, rather than to investing in gold, say, which can be traded more easily.

An insider speaking to the Robb Report put it well:

“Go buy a natural diamond engagement ring on 47th Street,” Ryan Shearman, of Aether Diamonds, says.

“Walk across the street and try and sell it. Tell me how much value you recoup. It’s not very far off from an automobile in that case. So if you’re not looking at your car as an investment, you shouldn’t look at your engagement ring as an investment. The value is what you make of it.”

Diamond hard

Diamond rings lose value over time, unless you’ve managed to get an outstanding deal. This has been true of mined diamonds for a long time and it’s certainly true of lab-grown diamonds now. They’re not a smart long-term investment.

The exception is extremely expensive or extremely rare stones. They are apparently a fairly decent place for the super-rich to park their money. But I don’t know the ins and outs myself, since I haven’t been able to find a billionaire willing to chat to me about his diamond stash.

For regular folks though, diamonds won’t rattle the capital gains tax cage anytime soon.

The diamond market is particularly unpredictable right now. Prices have dropped across the board, mostly thanks to the rise of the lab-grown diamond. Nobody knows how it’s going to shake out.

Maybe lab-grown will be a fad that fades? Perhaps the value of mined diamonds will plummet permanently? Or it could be that everything will stabilise and there’ll be a comfortable co-existence.

I don’t know. And neither, it seems, does anybody else.

Is diamond jewellery still valuable?

The manufacturing of diamonds opens up questions as to where the value of a diamond really lies.

Is it in the chemical composition? In the millions of years the diamond has spent beneath the ground, or in the labour involved in finding it? Is it in the rarity?

Or – my personal view – is a diamond’s value determined by its twinkliness?

Different people will give you different answers, depending on what they care about – and on how much they’ve invested in the diamond industry. An unbiased viewpoint is even rarer than a real diamond.

The interesting thing is that customers are now getting to decide where they want to assign the value for themselves. And I think that’s quite good fun.

But to answer the question – yes, diamonds are still valuable, for the time being anyway. That’s because their value as jewellery isn’t necessarily intrinsic to the actual properties of a given stone.

A lab-grown diamond in a rhinestone world

I mean, I’ve known a few people who buy themselves diamonds – but not many.

Diamonds are far more often a special gift to a special person for a special occasion, usually tied to a major life event.

And I’m not just talking about engagements. Diamonds are traditionally a milestone marker.  Anniversaries, births, important birthdays, graduations – even deaths (don’t look up ‘cremation diamonds’ unless you definitely want to know).

Sure, with my practical hat on there are more sensible things you could do with your money to celebrate a special occasion.

You could buy shares for your loved one or contribute to their pension. You could buy them a stack of premium bonds and cross your fingers.

But I’m not wearing my practical hat right now.

I’m wearing an engagement ring.

And when my new fiancé and I walked past the window of a traditional high street jeweller’s shop yesterday, we saw an almost identical ring to mine going for an eye-watering 15-times the price.

So now we’re smug as well as happy!

What caught my eye this week.

I don’t know about you, but I really miss that six-month spell last year when we all fretted about what was going to happen to pension allowances, inheritance tax, AIM shares, and all the rest of it.

Everyone knows financial planning is dull as dishwater. So why not living things up by throwing all the rules up into the air every few years?

That way we won’t get too complacent.

Instead: all the fun of the power-ups and banana skins in Mario Kart. Anyone might win – or lose!

Well rejoice because according to the Financial Times and This Is Money, financial firms have been lobbying the government to do away with – or at least severely do-in – the humble cash ISA.

The Financial Times reports that:

During a meeting last month, City firms lobbied chancellor Rachel Reeves to scale back incentives for cash Isas, arguing that the money would be put to better use if it were invested in the stock market.

Le sigh.

Cash cachet

Happily – though not exactly surprisingly, given it should be blindingly obvious to anyone – both articles found experts to defend the virtues of cash ISAs.

After all, here’s a rare popular financial product that anyone can understand.

Rates are now reasonable again. And the ISA shielding means there’s no returns lost to tax or time lost to paperwork.

This is what success looks like, and you can see why it turns the City green with envy:

Source: HMRC

Of course I know returns from equities and even bonds will very likely trounce cash over longer timeframes.

And ever since 2007 Monevator has been trying to help people understand how to invest more productively.

I also agree that boosting the flow of capital going into the London Stock Exchange would be helpful for Great Britain PLC.

But getting rid of one of the very few financial products that the average person is comfortable with – and upsetting the applecart yet again – is not a good way to encourage more investment.

How about instead educating people from school age about regular saving and compound interest, and what it might mean for their futures?

Or how about just not changing the rules on the whim of every other Chancellor, and instead letting us properly plan for the long-term?

Heck, how about politicians not inflict years of political chaos and ultimately economically damaging policies on the British public?

That way instead of flirting with recession every few quarters (see the links below) maybe we’d have enjoyed years of proper GDP growth and even some of the full-throated animal spirits that the Americans have seen.

And by the same token, maybe don’t bang on about ‘going for growth’ and then immediately inflict an employment-penalising kick in the arse for business as soon as your first budget comes around?

(Okay, and it’d be nice if we could re-roll the cosmic dice so we don’t have a pandemic and a war in quick succession next time.)

Honestly, for the average financially-confused person out there, just hoarding cash in the face of all this uncertainty seems very understandable to me.

Cash is not trash

If something must be done about this ‘unproductive’ cash – and to re-iterate, I’d prefer they just left well alone for a few decades – then I’d vote for carrots rather than sticks.

Let’s get rid of the ridiculous stamp duty on UK traded shares for starters. And scrap that pernickety £1.50 PTM levy on trades over £10,000 while we’re at it.

But something as fundamental as the cash ISA shouldn’t be up for debate.

Politicians who look forward to generous defined benefit retirement schemes need to understand that normal people in the brave new-ish world of defined contribution pensions face what’s notoriously the hardest problem in finance.

Given that is already a lot to cope with, some lasting stability might go a long way to encourage more learning about investing – and eventually coax more money out of cash and into other assets.

Get a real job

To be fair to her, Rachel Reeves doesn’t appear to be the instigator of any of this cash ISA dissing – though This Is Money does note ominously that:

The Chancellor did not dismiss the idea, according to a senior banker.

Really? Okay, then I’ll make the decision for her.

Dismiss it: we don’t need any more unforced errors.

Get on with sorting out planning or transport or a proper energy policy or anything big and bold that could actually improve our future writ large, rather than more fiddling with how we move this or that pile of the dwindling coins we’ve already got.

Cash ISAs are a solution to a problem – not the other way around.

Lord make my readers frugal, but not yet

On a totally unrelated note, ten years after I first sketched out a couple of ideas for ‘quirky’ investing-related T-shirts, we’ve finally got some Monevator merch coming your way!

Yes, you’ll soon be able to wear your love affair with investing on your sleeve – and in any colour too, so long as it’s Monevator-style black and white.

Got too much cash hoarded in your ISA? Then why not live large and spend a few tenners from it before Rachel comes a-calling…

This Shopify – um – shop of ours will also feature pointers to our favourite investing books on Amazon. Because you’ve got to eat your greens too, you know.

Anyway I’m going to rollout access to the shop in stages, so we don’t get overwhelmed* like in those Black Friday stampede videos that used to go viral a few years ago.

(What happened to those? I guess it’s all just standard behaviour nowadays?)

Moguls first – please watch your inboxes over the next few days for your teaser discount code!

And have a great weekend.

* I wish!

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