This Common Valentine's Gift Is a Terrible Investment

Diamonds may be forever -- but their value isn't.

For nearly as long as there have been humans, there have been decorations for said humans. When we had clay, we made beads. When we figured out how to work metal, we made bracelets and torques. And when we figured out how to encrust those things with sparkly bits -- well, an entire industry was born.

Today, jewelry holds a lot of places in our lives. It's seen as a status symbol, an accessory, and, by some folks, as an investment.

As we head into what is arguably jewelry's biggest day of the year -- Valentine's Day -- it's time to question at least that last bit. Because if you're going to shell out hundreds (or, worse, thousands) of dollars on a diamond ring or ruby bracelet, it's probably a good idea to know what you're getting into.

So, is jewelry really an investment, like from a personal finance perspective? Or is that all just marketing -- and wishful thinking?

Most jewelry won't hold its value

The sad fact is that the vast majority of jewelry is simply a poor investment. In many cases, it won't just lose its value over time -- it loses value as soon as you buy it.

A really good analogy for jewelry is a new car. That new car will probably never be worth as much as it is the moment you buy it. Once you drive it off the lot, it's almost instantly worth less than it was just hours ago.

The same thing can be said for jewelry.

You could easily spend a few grand on a piece of jewelry in one store, immediately walk into another jewelry store, and be offered half the cost of it (or less). That's because jewelry tends to have significant markups well beyond the prices of the parts.

Jewelry stores have a lot of overhead (yes, even online ones). And that overhead is built into the price of the jewelry they sell. But when you look to resell your jewelry, you're not going to get that premium back; instead, you'll be looking at whatever value the stones and metal have themselves.

Even the parts can depreciate

Of course, even when you break down your jewelry into its constituent parts, you're looking at a questionable investment, at best. That's because the value of precious gems and metals is capricious. It varies based on any number of market factors, including current demand.

Take diamonds, for example. While, in general, diamonds are thought to hold their value (note we're talking about the value of the gem itself, not the setting or jewelry that houses it), that value can vary significantly based on any number of factors. Part of the problem is that, although there is certainly a finite number of natural diamonds in the world, that finite number isn't anywhere near as low as the diamond companies want you to believe.

And then there's the lab-grown diamonds. Demand for man-made diamonds is growing, and for many good reasons. They're more affordable, often better quality (in terms of the four Cs -- carat, color, clarity, and cut), and they don't rely on, you know, slave labor.

Even the metals aren't guaranteed to increase, or even hold, value. The price of gold, for instance, actually decreased in value between 1980 and 2000. And its rebound has been slow, at best.

The (intangible) value of love

In the end, I'm sad to say that your jewelry box is not akin to an investment or savings account. Sure, it might hold some resale value, especially if you have more sought-after pieces, but don't count on it being worth anything close to what was paid.

But you know what? That's OK.

For many people, the value of their jewelry is an intangible value. That is, they appreciate its sparkle, its aesthetics. And, often, we value the sentiment even more than the stones or metals; an engagement ring or locket can be worth far more to the person receiving it than its price tag would imply.

That last bit is key. Because it really is more about the giver than the gift.

So, instead of shelling out the big bucks for jewelry this Valentine's Day, consider some more personal alternatives. At the end of the day, the very best gifts are those that show you really thought about the other person -- not that you simply threw money at the situation.

Here are some budget-friendly ideas to get you started:

• Plan to take a class or do an activity together
• Pack a simple meal and have a picnic
• Make a gift and/or card by hand
• Bake their favorite dessert
• Write a love letter full of sweet nothings
• Have a weekend away (no phones allowed)
• Put together a basket of goodies for romantic night in

At its heart (pun intended), Valentine's Day is about showing your partner that you care. Happily, you can do that while also showing your finances that you care. That's a win-win!