The first portion of this post will be about headphone systems under $100.
Best I've heard was this system:
Lepai LP-2020A+ speaker amp
![Right arrow :arrow_right: ➡️](https://cdn.jsdelivr.net/joypixels/assets/8.0/png/unicode/64/27a1.png)
️ STAX SRD-4 electret converter
![Right arrow :arrow_right: ➡️](https://cdn.jsdelivr.net/joypixels/assets/8.0/png/unicode/64/27a1.png)
️ STAX SR-30 electret headphones
...But it's only available used, if you can find it...and it's pretty uncomfortable and inconvenient. The sound was very transparent (blowing away anything near this price range in that respect), but the headphones distorted in the bass at high volume sometimes, so I had to reduce the bass and/or volume.
My second favorite is the semi-open Koss KTXPRO1. Unlike the on-ear SR-30, these on-ears are one of the most comfortable headphones I've worn, and the sound, for me, beats plenty in the three-figure range despite it only costing ten or twenty bucks. (Heck, even with four-figure headphones on my desk, I still often reach for the KTX.)
In the circumaural open-back category, the Philips SHP9500 would be my pick.
Moving on to the $200-400 range...
Again, used STAX is the best I've heard, and you can find full-fledged electrostatic systems if you get lucky.
If you can find a used one, the discontinued HIFIMAN HE500 is probably my favorite non-electrostat in this price range. You'll want a good amp for it, though, as it has low sensitivity.
Assuming you can't find such good deals, the Sennheiser HD 650 is an excellent all-rounder that has less weaknesses than plenty of far more expensive headphones.
For closed-backs, I like the Yamaha HPH-MT220 and JVC HA-SZ2000, for audiophile and basshead purposes respectively. Both of those can be had for under $200.
There are all sorts of decent DACs, amps, and DAC/amps that don't cost much, especially if you get them used. Just research which ones have the features you're looking for. To get by, you don't have to buy expensive electronics. You can start with a cheap DAC/amp, then upgrade later. It's generally a good idea to focus your budget on finding your ideal headphones, then you can enhance their sound with the right gear.
As for diminishing returns...don't worry about it. Finding the sound signature you seek is far more important than how much "better" one headphone is than another. Technically speaking, diminishing returns kicks in very early. That Koss I mentioned isn't
that far behind any headphone. You have to pay a premium for improvements in sound quality, and there's no guarantee whether you will even like a more expensive headphone more than a more affordable one, or that a more expensive one will even be better in the first place. Whether the improvements of better headphones are worthwhile is up to the individual. Once you get enough experience, you will (hopefully) find your sweet spot of how much you're willing to pay.