Today, more and more people are looking for a way to invest their money so that it brings them additional profitability and financial stability. When it comes to investments, many automatically think of stocks, bonds, real estate, and in the last few years cryptocurrencies. Every experienced investor knows that he should not put all the eggs in one basket, i.e., that it must ensure the diversification of its investment portfolio in order to reduce the risk of failed investments.
For this reason, there is no shortage of investors who invest in the purchase of luxury branded watches. They tend not only to retain but even significantly increase in value over time. This definitely sounds tempting, but before you decide whether to diversify your portfolio with this type of luxury asset, there are some important things to consider.
Should you invest in luxury watches?
When you invest in luxury goods, including branded bags, watches, works of art, etc., your return on investment is derived from the appreciation of capital. As we have already hinted above, luxury watches, the work of certain famous brands, are in great demand and have historically proven that they retain and even increase their value several times.
Also, as an advantage we must add that with proper maintenance, quality branded watches can be kept in excellent condition, which in turn allows them to be sold over time at a high price.
Some models, especially those of limited series, due to their rarity and high collector’s value, can significantly increase their price. Such is the case with the legendary Rolex Daytona watch, which was owned by the famous actor Paul Newman. Five years ago, it was sold at auction in New York for a record $ 17.5 million.
In this case, in addition to the brand and model, high value is given by the fact that the watch has its own unique history – it is owned by a famous actor, and also on its back, there is an engraved message from Newman’s wife – “Drive carefully”.
The irony, in this case, is that when it first appeared in the 1960s, the watch cost about $ 300 and was widely disliked because people then considered it “too ugly.” This quickly changed after the actor turned this model into his signature and wore it almost everywhere.
Newman’s Rolex is definitely an example of a watch that has multiplied in value over the years, and this story has enthused many passionate collectors and investors. However, this is far from a guarantee that every luxury watch will achieve the same success. However, you should know that, like any other, investing in luxury branded watches carries some risks.
Investing in luxury watches – what are the risks?
Investing in luxury branded watches requires you to be a good connoisseur of the watch industry, and you also need a flair to predict which models would have an even higher value in the future. Not every expensive watch will keep its value. Therefore, when you buy a watch with the intention of selling it for a higher amount in the future, you should choose a model that is rare enough to be in demand, and also keep it in excellent condition.
You should keep in mind that over time, the trends and tastes in the luxury watch market are changing. As in the case of Paul Newman’s Rolex – in the beginning, this model was not popular and even its owners were willing to sell it at twice the price. However, over the years, trends and preferences change, and with them the value of the watch increases. For this reason, many owners of luxury accessories have to wait years until the models they own to become more desirable and sought after again and can be sold at a significant profit.
Another risk that you need to know about is the so-called “bandwagon effect”. This is a well-known phenomenon in the investment community, which means that people do, think, or believe in a certain thing, ignoring their own understandings, because a large social group also does, thinks, or believes so. In this line of thinking, the more people rush to invest in luxury watches, the more their demand increases. The problem is that at some point, this increased enthusiasm can turn into a bubble.
In terms of risks, the gray industry and counterfeit watch manufacturers are flooding the global market with more than 40 million imitations of luxury models a year. While some of them are visibly low quality, other fakes are so clever that you can hardly doubt their authenticity. Therefore, it is extremely important, especially when buying used watches, collectors, and investors to work with a trusted dealer and an experienced appraiser to confirm whether the proposed model is original. Buying a counterfeit can ultimately cost a significant and unjustified loss of financial resources, so it is necessary to be careful in such situations.
Last but not least, the cost of luxury watches is not limited to buying them. Such luxury accessories require regular maintenance, as the presence of imperfections and damage usually leads to a drop in their price. All repairs must be carried out by authorized specialists.
You also need to think about the proper and safe storage of your watch collection. Only years ago, the famous actor Orlando Bloom was robbed, and all his carefully collected luxury watches were stolen. Fortunately, the story had a positive outcome for Bloom, as the perpetrators were discovered by the police, and the watches were returned. However, you should not leave this to chance.
Return on investment
As mentioned, not every expensive branded watch has the potential to significantly exceed its value in years to come. When it comes to investment, experts recommend targeting so-called “blue chips”. This definition applies to classics that maintain the high demand and almost unceasing interest, such as Rolex Daytona, Patek Philippe Nautilus, Audemars Piguet Royal Oak, and others.
The first Patek Philippe Nautilus, launched in the mid-1970s, cost $ 3,100. Taking into account inflation, the original price of this model is now equal to over $14 000. Currently, this second-hand model is available for $218 000, which is an increase in the price of over 1300% in 50 years.
In conclusion, investing in watches requires patience and good knowledge of the market, but on the other hand, it has the potential to pay off many times over.
The reason for my increased interest in the topic is my passion for branded watches, which later became a business – Timedix.