Ep. 51 - 6 Factors That Explain Why a 1 Carat Diamond is the Best Bargain on Earth

In this episode, I'm going to summarize a brilliant talk I heard "way back when," from a legend in our industry, Shane Decker. (I got his permission, and one day I'll have him on as a guest.) His profound love for diamonds and unwavering respect for the jewelry industry are truly remarkable.

Shane's talk centered on the notion that diamonds, specifically 1-carat diamonds, are drastically undervalued. This might sound surprising given the substantial price tags attached to high-quality 1-carat diamonds. However, Shane presented six key characteristics of diamonds and assigned a dollar value to each, ultimately revealing that a 1-carat diamond is worth significantly more than people realize. In fact, it could be valued at over $100,000 more than its market price.

The first aspect of a 1-carat diamond's value is its rarity. Natural diamonds, which we're discussing here, are incredibly rare, with only 20% of mined diamonds being of gem quality. Out of that 20%, only one in a million will be a 1-carat diamond. This rarity is mind-boggling when you consider the number of diamonds that need to be sifted through to find just one.

Factor number two is the mining costs, which are astronomical. It takes a massive 250 tons of earth to yield a single 1-carat diamond, making the process incredibly labor-intensive and expensive. We assigned a $25,000 value to this factor.

Factor number three is the cutting of the diamond. The importance of the cut in determining a diamond's value cannot be overstated. Only highly skilled diamond cutters, who have undergone a decade of apprenticeship, can work on 1-carat diamonds. We, conservatively, assigned a $25,000 value to this factor.

The fourth factor is the endurance of a diamond. Diamonds are incredibly durable, lasting a lifetime and more if treated with respect. This factor alone adds $25,000 to the diamond's value.

The fifth factor is the antiquity value. Natural diamonds are over 3 billion years old, making them older than almost anything else you can purchase. This factor is often overlooked, and we added $25,000 to account for it.

Lastly, the sixth factor is the investment value. Diamonds have historically doubled in value every ten years since 1940. More importantly, they hold emotional and sentimental value that cannot be quantified in dollars. We assigned another $25,000 for this.

When we add up these six factors, the value of a 1-carat diamond comes to a staggering $150,000. This is a far cry from the actual market prices, which can range from $2,500 to $15,000. The episode doesn't focus on what you should spend on a 1-carat diamond; that's a personal decision. Instead, it highlights that a 1-carat diamond, potentially worth $150,000, can often be found for as little as $15,000, making it one of the best bargains on earth.

If you'd like help finding a jeweler closer to home, email me at andy@buylikeaguy.com and I'll do my best to put you in touch with some of the best jewelers on earth.