Kim Kardashian’s engagement ring, valued at an estimated $2 million, features a 16.5-carat emerald cut diamond along with two side-diamonds, each weighing in at two carats themselves. Kardashian and her fiancé, NBA star Kris Humphries, have been gushing over the rock and their love for each other; Kardashian told People that she’s found the perfect man and the perfect ring. But are enormous diamonds really good investments?
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The diamond industry would like you to think so. Diamond sellers have written widely on the subject, arguing that diamonds make a better investment than stocks and real estate, partly because they do not depend on the health of a single economy. Plus, unlike stocks, they decorate your hands and allow you to impress your friends (or in Kardashian’s case, fans).
But here’s one of the main problems with locking up your money in a glittery gem: It’s not liquid. So if you suddenly need the money, you can’t necessarily turn the jewel into cash overnight. And if you do need to sell the piece quickly, you’ll probably be forced to sell at a discount. In other words, just because a ring was purchased for $2 million doesn’t guarantee that one day it will sell for $2 million.
Also, because engagement rings are so tightly connected to a huge life event, they hold a lot of sentimental value, which has no cash value to others. That means you probably value your jewelry at a far higher price than strangers do, which won’t help you if there’s a time that you want to sell it. And if you end up keeping the ring in the family and passing it on to future generations, you’ll have a beautiful family heirloom, but you’ll never see the cash again. [See Even Celebrity Couples Need to Talk About Money.]
While diamonds’ popularity has demonstrated remarkable staying power over the last several decades, they haven’t always been the go-to stone, and there’s no guarantee that they will continue to be. In fact, it’s entirely possible that growth in synthetic diamonds will dilute the value of the gemstone, or that popular preferences will shift away from such flashy displays of wealth. Diamonds’ association with terrible violence in Africa certainly diminished demand for the stone in some circles. In fact, diamond values have stayed relatively flat since the 1980s.
Of course, wealthy celebrities don’t live by the same money rules as the rest of us. According to Fox News, Humphries, 26, earns more than $3 million a year playing for the New Jersey Nets, and he has earned $17 million over the past six years. Still, that hardly makes a $2 million ring an affordable purchase. He went far beyond the old rule (invented by the diamond industry) about spending the standard two-month salary on an engagement ring. His splurge is the equivalent of an office worker earning $60,000 a year purchasing a $40,000 diamond.
But here’s a twist that just might justify the immense price of the ring: Given the fact that Kim Kardashian’s livelihood depends on fame, and the engagement has already landed the couple one magazine cover and countless article and blog mentions, it serves as a valuable publicity tool that could ultimately generate more money.
In fact, Fox News suggests that the couple’s wedding will likely be featured on a reality show special, and photos of the big day could sell for mega-bucks. In other words, the $2 million ring is just a sparkly way of marketing the Kardashian brand. (Plus, Fox adds that the E! Network might have helped pay for the ring or negotiated a discount with the jeweler, who is also receiving plenty of publicity.)
Lastly, there’s the romance factor. Kardashian clearly wanted an enormous piece of ice on her finger and was impressed with her fiance’s choice. In her interview with People, she said that back in high school, she bought a fake ring for herself at Macy’s that looks just like the real thing currently perched on her hand. The desire to be bejeweled appears to run in the family; sister Khloe wears a $850,000 radiant-cut diamond and the Kardashian family is tight with jeweler-to-the-stars Lorraine Schwartz, who designed Kim’s bling.
The bottom line: Diamonds might be a good investment—just not the financial kind.
Kimberly Palmer (@alphaconsumer) is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.
Corrected on : A previous version of this story misspelled the New Jersey Nets.