Are diamonds forever? Insights from 22 years of zero-return saga

Diamonds, synonymous with luxury, captivate investors, but their investment potential tells a different story

- Anil Poste

De Beers' 1947 slogan, "A diamond is forever," revolutionized the industry. The ad campaign established diamonds as the most romantic purchase, and the status is still paying off. However, what about their value as investments? Are diamonds really forever?

Mint asked experts to share investing lessons from diamonds' two-decade-long price stagnation and whether modern-day assets like cryptocurrencies will meet the same fate.

Radhika Gupta, MD and CEO, Edelweiss Asset Management Ltd

The key thing is some asset classes can structurally be in decline and not deliver any returns for over 20 years. Commodities are a clear example of this as prices depend on supply and demand, and there's no inherent reason for them to grow over time.

For instance, the diamond market has been disrupted by lab-grown diamonds, which have reduced demand and impacted the value of natural diamonds. This shows how changes in market dynamics or technological advancements can lead to prolonged price stagnation or even a decline.

Unlike equities, commodities don't have a natural growth trajectory and are not long-only assets as they don't create value through advancement. Equities are different. In a growing economy, firms drive growth through innovation, expansion and productivity, creating long-term value for shareholders, making equities more reliable for wealth creation over time.

While commodities can have a role in a portfolio for diversification or as a short-term hedge against inflation, they are unlikely to deliver steady, long-term growth. Relying on them as the primary driver of wealth may lead to disappointing results.