A Practical Guide to Buying an Engagement Ring

I've been in the position of buying jewelry for a special somebody at least several times, and in the case of diamond engagement rings, I've done this three times.  So I want to impart some experience to some up and coming, love-struck men who will be following after me.  A lot about diamond shopping is confusing because we don't think about it much.  To the diamond experts out there, I won't be getting into too many technical details so there's no sense trying to pick a bone with me.  The truth is that emotion governs a lot of diamond shopping and nobody does this very frequently.  So this is more of a practical guide to keep somebody from getting ripped off without needing a lot of expert knowledge.  A normal man buys houses more frequently that he buys diamonds so he's going to need some advice he can implement in the store.

Diamonds Are Worthless

Gentlemen, the diamond may be a girl's best friend but they are worthless to us.  I'm not just talking about the cabal of diamond miners and producers that have conspired to restrict diamond supply to the market to keep diamond prices high.  Everybody knows this.  Diamond producers and jewelry makers know this.  I've even read articles from diamond experts that openly talk about this. So this is no secret.

What I mean by worthless is that once you buy a diamond ring, that money is gone for good.  You're never going to see it again.  A diamond isn't an investment.  It won't appreciate.  That appraisal you got for it is worth less than the paper it was printed on.  If you don't believe me then try selling it.  You will never get an offer anywhere close to what you paid for it.  Pawn shops and other jewelers will low ball you so much it will be insulting. Yes, there are cases in the news where somebody like Elizabeth Taylor can sell a diamond for a tidy profit of millions of dollars.  Those are the exception and not the rule.  Unless you are going to a celebrity auction there is nothing exceptional about the diamond that you'll be buying.

Jewelers don't like to buy back their own diamonds.  They were never their own diamonds to begin with.  They were loaned to them by a diamond dealer or distributor on consignment.  This means they don't have to buy the diamond for it to sit in their jewelry case.  They don't need to pay for it until they sell it.  Buying the diamond back from you would put their own money at risk.  Not gonna happen!  Of course, some places will offer you some store credit or a trade in value on other merchandise in their store, but you'll still get hosed on the deal.

So that $5,000 you spent on an engagement ring?  It's gone.  I don't like it either, but that's the point.  Women are wired through eons of evolution to seek men that are good providers and will stay with them.  Because of this, men have to find a way to demonstrate that they are such men to win a woman's affection.  Buying a car, a house, or power tools isn't good enough.  Items like these contain intrinsic value to a man though their utility.  You have to give her something that has no intrinsic value to you and diamonds fit the bill nicely.  We may shake our fists at De Beers for monopolizing the diamond supply, but realistically, if it weren't diamonds being considered proof of commitment and providership, then it would be something else and that luxury commodity would be hoarded by a corporate cabal.

Guys, let's face it.  We want to do this for a woman we really like.  We'll also want to spend just enough for it to satisfy our own primal desire to take care of her.  This is why buying costume jewelry isn't going to satisfy that urge.  It will require a parting with a significant portion of your wealth knowing that it's gone for good.  So it's our responsibility to make sure that the girl is worth it. If you chose your girl wisely then you'll only need to be held over a barrel like this once in your life.

Cut is All That Matters

Cut is all that matters.  I'll repeat: Cut is all that matters!  Let me say it again for the cheap seats: Cut is all that matters!

You may have heard about the four C's--Color, Clarity, Cut and Carat. They are four criteria that diamond experts use to grade and price diamonds.  Jewelers will be more than happy to explain the scales they use because an educated customer is usually more satisfied with their purchase and less likely to bring it back for a refund or exchange. So jewelers will tell you all that you want to know about the four C's.

A lot of diamond shoppers want to find the perfect diamond and consider every C as important.  This isn't the way you should shop for diamonds. You have to think of each C as a piece of pie.  It isn't possible to increase one slice without shrinking one or more of the others.  There will be trade-offs.  The C you should consider most important, or the biggest slice of the pie, is the cut.

 The key thing to remember is that every diamond that you are likely to see in the store is flawed in some way.  Examining the diamond at only 10x magnification will reveal defects called inclusions. A jeweler is more than willing to let you look at the diamond for yourself.  Keep in mind that the grading scale is subjective.  You will see inclusions but you won't be able to tell how included the diamond is without a standard scale in front of you.  Even if you had such a scale, your diamond isn't going to match to any standard precisely.  There will be a judgement call being made.

Color is even more subjective.  Since diamond is transparent, it will be difficult to determine a true color value unless you had perfect lighting and the diamond was placed against the right background. Despite all the diamonds I've seen at varying color grades, I could never see a difference in color with my untrained eye.

There's also an incentive among dealers to exaggerate color and clarity grades for their own benefit which only makes the diamonds more expensive.  Legally, it isn't considered fraud as long as the grade on the certificate in the jewelry store is within 2 grades of it's true grade.  Why?  Because the scales are subjective.  Yes, there are standards for the clarity and color scales, but very few diamonds match the standards precisely.  Assigning the grade is often a judgement call, even among experts who are unbiased or have no vested interest in your transaction.

So there's no such thing as a perfect diamond? Yes, there are, but they aren't sitting in a jewelry store waiting for you to buy them.  More likely, they are sitting in a museum or somebody's safe. The perfect diamonds are referred to as investment grade and have already been purchased, auctioned and traded by dealers and distributors.  We are too far down the supply chain to even have a chance of seeing them.

You won't likely notice the color or the flaws if the cut is good and the diamond is set properly. A well cut diamond will have enough brilliance to wash out any defects or color making them imperceptible to the naked eye.  For this reason, I recommend the round cut or the princess cut.  Both shapes are cut to maximize brilliance and sparkle.  This is why I suspect they are the most popular cuts.  Something like an emerald cut would be a poor choice because the emerald cut emphasizes clarity and gives the diamond a very transparent, glassy look which makes inclusions much easier to see. An inclusion can often be concealed if it is near the edge of the diamond or under one of the prongs in a setting.  If you notice any color, it's probably the color of the setting being transmitted through the stone.  Even a white gold or platinum setting can effect a diamond's perceived color.


The important thing to keep in mind is that you only need to worry about the cut of the diamond.  How beautiful your fiance is going to think the engagement ring is will be determined by it's cut because the diamond's cut determines how well it sparkles and it's apparent beauty. Jewelers have different grades of cut, but do you think you can tell the difference between an excellent cut and a very good cut?  Maybe not.  You might as well look at a few stones and pick out the one that sparkles the best.

Size Doesn't Matter Much

There's one more C to cover and that is carat weight. The size of the diamond, or carat weight, tends to be regarded as crucial.  Out of the four C's of diamond grading, this is the only one you can verify independently and objectively.  In reality, it doesn't matter much.  It's effect on you or your fiance is entirely psychological. 

This isn't to say that the diamond's weight doesn't effect its price.  It does.   Larger diamonds are more rare than smaller diamonds, and therefore, more expensive. One would expect that if we were to plot a graph of price versus carat size, we would see something like this:

Price should dramatically increase with carat size when considering diamonds of equal quality.  However, this is the idealized case.  This graph isn't what we see in reality.  In reality a price versus carat weight graph would look like this:

The price per carat still trends upwards, but in a stepwise fashion.  The important thing you should notice is that the dramatic increases (the steps) occur at popular sizes.  There's a step (a dramatic price increase) at 0.25 carat, 0.50 carat and so on.  This is because these are the sizes that most people ask for and are in high demand.

You can use this information to your advantage. Most people can't determine a diamond's carat weight by eye.  You would have to weigh the unmounted diamond on a scale.  Considering the different shapes and cuts that are available for diamonds as well as the different settings that a diamond can be mounted in, I would say determination of carat weight by eye is virtually impossible.

A 1-carat diamond, considered by many people to be a good size, weighs only 200 milligrams.  Each carat is divided into 100 points, meaning that each point is about 2 milligrams, or the weight of 2-3 grains of sugar.  Few people can tell the difference between a diamond that is 0.5 carat and 0.49 carat, or even 0.45 carat for that matter.  With 0.5 carat being a popular size, you can save a significant amount of money by buying a diamond that is 0.45-0.49 carat, which places your diamond right before one of the steps on the graph and a lot less expensive.  In industry parlance this is known as buying shy.  You can buy a 0.45 carat diamond for your girlfriend and say its "about half a carat" and you should be fine, unless she was looking for something dramatically bigger!

If your feeling guilty about adding a few points to a diamond to impress your girlfriend and save a few bucks, don't be.  A person's inability to determine carat weight is why jewelers tend to round up or exaggerate the size of premounted diamonds.  A jeweler can take a diamond that weighs 0.30 carats, mount it in a setting, call it a 1/3 carat diamond ring and make an extra $500.  But can anybody really detect a 0.03 carat difference (a measly 3 points)?  Not a chance!  So don't rely on your eye.  Make sure you shop at a store that has loose diamonds that can be weighed on a scale at the shop.

Diamond cutters further up the supply chain can also play fast and loose with carats and points.  They also know that certain carat sizes bring in significantly more money and they may cut the diamond for size instead of brilliance.  Did I mention that cut is the only thing that matters? All the angles and facets for the different cuts of a diamond have been worked out and optimized for brilliance a long time ago.  All the stones are scanned and modeled on computer.  There should be little margin for error.  The only reason why diamond cutters would change the cut is to produce a larger diamond that they can sell for more money. Stick with beauty instead, even if the diamond is a couple points smaller.

So don't feel guilty over a few points difference.  Jewelers and diamond dealers certainly aren't being to ethical about it. You're also insuring quality while being a little more flexible on the carat weight.

 

What About Synthetic Diamonds?

Diamonds are composed of carbon that has been crystallized within the earth under heat and pressure for long periods of time.  The pressure and heat requirements have been duplicated in the laboratory in recent years so now it's possible to manufacture diamonds.  Although there is no chemical distinction, the industry designates these man-made diamonds as synthetic diamonds.

So does this make diamonds cheaper?  Can I can save money by buying synthetic diamonds?

No, not really.  It takes significant energy and time to make diamonds of an appreciable size and that is a cost that needs to be recovered when sold.  Having said that, the synthetic diamond will be cheaper than a natural diamond of comparable quality.  But there's a catch. The manufacturer isn't going to go through all the trouble of making diamonds that don't end up being completely flawless.  Certainly, such synthetic diamonds will be cheaper than the natural variety, but remember, we're not ever able to buy such diamonds to begin with. The diamonds we get to choose from at the store are all flawed in some way.  So while the flawless synthetic diamond is significantly cheaper than a flawless natural diamond, the flawless synthetic diamond is still going to be more expensive than the flawed diamonds you find in the store.

There are some websites that claim to offer synthetic diamonds at cheap prices but they are really cubic zirconia (ziroconium oxide) or moissanite (a silicon-carbon mineral) so read carefully and buyer beware.

The Human Cost

An unfortunate reality is that many diamonds come from areas of the world that are at war (civil war or war with another country), flagrantly commit human rights abuses, and under control of brutal and corrupt governments.  Countries in Africa have had a well documented history of mining diamonds with slave labor and selling them on the international market to fund wars and rebellions.  It should be unnerving that buying diamond jewelry could be supporting these abuses, but nobody seems to care, and a man will probably be accused of being a cheapskate if he was to seek an alternative means to show commitment than a diamond engagement ring. 

The Kimberly Certification Process was ostensibly created to ensure that the proceeds from diamonds being sold internationally aren't being used to fund wars, but I'm skeptical about how effective this certification process is.  Who is policing these countries and enforcing this and how can we tell if the certification is valid while we are talking about an area of the world where bribes for political favors is commonplace?  What about us, the end users of diamonds?  How do we tell where the diamonds came from?  The fact is we don't know anything about the source of the diamonds we buy and we won't anytime soon since there's no transparency in the diamond trade.

On the other hand, diamond mining seems to be the only viable option for income and trade for a lot of poor countries.  If done properly, it could mean the difference between prosperity or a bleak future.  But this doesn't mean that you need to pay more than you should for diamonds.

Get an Appraisal

Lastly, I would recommend getting the ring appraised by an independent appraiser, not the jewelry store itself.  Just because you dropped $5,000, it doesn't mean that it's worth that much, although many will guarantee that it will appraise for that amount you paid or more.

Like I said earlier, you're never going to get the appraised price when you try and sell it, but insurance companies like to know the values of things that they insure.  A lost or stolen ring might be insurable in some cases and you can be reimbursed for the loss.

Also, there's going to be a roughly 50% chance that your marriage isn't going to make it 'till death.  I hate to be a cynic, but divorce is a realistic possibility for you.  There's nothing keeping you together and you can dissolve the marriage at any time--often against your will because most divorces are filed by women.  The appraisal will be useful for assigning value when dividing the marital assets.  You don't want the judge or lawyers to assign a low value for the ring and have you pay more in the settlement so the appraisal will come in handy.  It might not seem like a big deal, and you'll think there's more important things to fight over, but letting her keep the $5,000 dollar engagement ring might mean you can keep the living room set or the car.

I can't tell you how much you should spend.  The rule of thumb says two months salary but that's a bunch of bologna.  This rule was peddled by the same people selling the diamonds to begin with.  But I believe that you should get what you pay for, and then some.  So I hope this article helps.