The ultimate guide to investing in watches
Before we get started, we want to make one thing clear... This blog is not offering investment advice, we’re offering an insight into the watch market and the way it performs, from our experience.
Is a luxury watch a financial investment?
Luxury watches from brands such as Rolex, Patek Philippe and Audemars Piguet's can be great investments, assets and stores of value. Luxury watches can be used to hedge inflation, transfer wealth, inheritance vehicles, and to command status in certain environments. A rule of thumb is that the harder a watch is to find, and the more desirable it is, the better it performs as an investment. It’s simply supply and demand.
Can luxury watches be used as a pension fund?
A pension fund, also known as a pension scheme, provides income during retirement. You pay into a pension fund every month; this can be offered by your employer, the government or a private pension. The fund managers accumulate a lot of money and use it to invest in private and listed companies, real estate and commodities like gold in hopes of hedging inflation and making a return on investment (ROI). When you look at some of the asset classes a typical pension fund could invest in and compare them to the performance of the luxury watch market you see how well the luxury watch market has grown significantly and provided a reasonable return to those invested in the luxury watches.
Are watches a good investment?
Luxury watches are used by some of our clients as investments and stores of value, there is no way to guarantee where the price will go in the future but historically a select few luxury watches and watch brands have performed very well. If you’re interested in buying a watch as an investment, you should make sure you understand the watch market as well as the brand and model you are investing in. If you have any questions, please contact us.
The luxury sector
With more millionaires than ever before and emerging markets taking huge market share of the luxury sector, the super wealthy are buying up luxury assets and seeing brilliant returns. From Channel and Birkin bags to limited edition Ferraris and Porsches to watches, all of these products seem to be in high demand and low supply, which suggest that over the long term they may hold value well or even increase, however, they could lose value just as easily as gaining value and there are multiple conditions to condition too such as economic landscape and use of the product.
Investing in a Rolex watch
If you look at the performance of Rolex watches since they were first seen in the market, pretty much all models that are more than 5 years old are selling for more today when compared to the original RRP, they have gone up in value at a much faster rate than inflation too. Clearly, we are in a more negative economy right now but that is a short-term problem that won’t last forever, so, does this mean you should buy the dip and invest in Rolex watches and other premium brands while prices are low? Our opinion is that the current market represents a great buying opportunity to get your hands on those pieces that were previously out of reach, but is the current market an investment opportunity? Only an investment adviser could answer that question.
What happened to the watch market in 2022 (the 2022 price drop)
Late 2021 through to 2022 saw dramatic increases in demand and prices for luxury watches, take the Rolex 116508 John Mayer for example, in December 2021 this watch was trading around £60,000, by March 2022 it was trading for £120,000. It doubled in 4 months! Clearly this wasn’t sustainable and anybody with a level head knows what goes up must come down and it sure did. The war in Ukraine was the start of the end, from the end of March 2022 prices started to fall, the world got scared, the media became negative, and people were more cautious in the face of the unknown. The value of watches shot back down and in some cases the value lost was around 40% but if you look at the value of most luxury watches over a 5-year period, you will find that prices are still up.
The reality of an investment
Investments always carry a risk, but most average investors looking for a passive investment and may opt for a safer investment rather than a high risk, high reward investment. Regardless of the type of financial investment you choose, most investments are no more than numbers on a screen, you don’t have anything physical or tangible to use and enjoy. You could choose property, but you need to consider running and maintenance costs. You could choose luxury cars, but you can’t drive them and increase the mileage, you must keep them stored in a suitable environment which is another cost. If you choose luxury handbags, you can’t really use them excessively without losing great value.
The benefits of investing in a Rolex or luxury watch
A watch is something that can be used daily and retain value or even increase over the long term. This provides value to your pocket, your mind, and your appearance which can all elevate your status and result in more success for you. There are extremely rare and very high value watches available to purchase too, watches that you would never wear, and you would only keep in a safety deposit box as a store of value. The beauty of buying watches is that you can pick and choose the correct models for you. The options are seemingly endless with a wide range of benefits.
Selecting the right investment watch
Just like any investment, you should always do your due diligence and be sure of what you're investing in, you should never rely on somebody else's information. It's important to know all the facts, first hand yourself. It’s worth noting that all investments have some risk associated and you should not invest in anything if you are not prepared for the downside as well as the upside.
If you’re considering investing in a luxury watch it could be worth building a relationship with a professional who can help guide you and source your preferred watches at a good price. A professional should help you understand what makes a good investment and how to spot them, a general rule of thumb would be to look for rare watches that are limited and in demand from brands that have a proven track record such as Patek Philippe and Rolex.
Can a watch be used as an inheritance vehicle?
Watches are a great asset to hand down to your loved ones, they can represent your character and help your loved ones feel a connection with you long after your gone. Sentimental value aside, handing down money to your loved ones can be a tricky process full of documents, and if your loved ones are overseas, it could get even more complicated.
Watches are used by many of our clients as stores of value that can be transferred to their loved either before or after they pass.
Handing down money to your loved ones includes taxes and a long process, or you could simply buy a luxury watch such as a Rolex and gift it to them before you pass away. Your loved ones will have the option to keep the watch(es) or sell them/it for cash, therefore avoiding inheritance tax and making the inheritance process faster.
Should I buy vintage or newer luxury watches for investment?
When investing in any watch, you should consider supply and demand, condition and return on investment. Newer models may be easier to value and liquidate due to the demand in the market, whereas some vintage models may take longer to sell because the demand is smaller. An example of a strong-performing investment watch would be the Rolex Submariner 116610LN. In the summer of 2009, this watch had a market value of around £3,500, and now it's at £8,500. This is because these watches are becoming harder to find as they are not in production.
(According to chrono24 and based on the average price of a "Good condition” model.)
What are the risks of investing in luxury watches?
When it comes to investing in watches, you should always consider market changes, storage, maintenance costs and the risk of brands and companies losing popularity and sales. No investment is guaranteed.
5 benefits of investing in luxury watches
Appreciation in value
The most sought-after benefits when investing in anything is appreciation and value retention; everybody wants to know that they have more now, than what they initially put in. Historically, Luxury watches have appreciated on average and some luxury watches may be a viable option for investors today.
Tangible and portable
A watch is considered a tangible and portable asset, it can be easily transported or traded it can be quickly liquidated for cash. This gives control to the owner, knowing that they can store it where they want and access their collection 24/7.
Diversification
Investing in luxury watches could improve the diversity of your portfolio, there for it may help you minimise volatility, increase your opportunity for growth, reduce and manage risk, improve the liquidity of your portfolio and help you get closer to your long-term financial goals.
Inflation hedging
Luxury watches could help you to hedge inflation. When the cost of everyday goods increases, your asset could remain relatively stable, and when investing in discontinued and more collectable watches, value can be even more stable and may even appreciate due to the scarcity and lasting value. This is what we have seen historically. Luxury watches can be effective at preserving value, and some have even appreciated in periods of inflation.
Person value
Not only can watches be fantastic investments, but they're also very nice to look at and wear. When you invest in luxury watches you can wear them day-to-day without diminishing the condition or value too much. You can't wear your premium bonds, or stocks like you can a Rolex. When you walk into a room with a Rolex, you instantly command respect from your peers, and holds you to a higher standard.
5 risks of Investing in luxury watches
Market changes
Investments carry risk, and sometimes the market changes, whether this be for better or for worse. You must take into fact that these assets are medium to long-term investments, and you shouldn't think too much of short-term ups and downs. Market changes are unpredictable and we suggest you do your own research before investing in anything.
Maintenance
Maintaining an investment can seem like a headache to some people. Luxury watches can require little to no maintenance, depending on the age, condition and environment they are stored in. A safe watch box and a couple of winds a week are all you need to take care of most luxury watches. Click here to read our blog about watch maintenance.
Liquidity of some models
Investing in luxury watches can be a good alternative to traditional investments, but you should consider the liquidity of some models before purchasing them. Some watch models can take a long time to sell despite being good investment. Some luxury watches can be easily liquefied for the right price.
Overpaying on the first purchase
If you overpay on the first purchase of your luxury watch, it may push back when you will start to see a return/ ROI on your timepiece. To ensure you don't overpay for your timepiece, you should go to a reputable watch dealer with good reviews, competitive prices, and transparency.
Proper storage and security
Watches can be easily stored in safety deposit boxes and home safes, however this can come with a cost. We use watch coffins to store our watches. Watch coffins are small and versatile and do a good job of preventing scratches and damage during storage and transportation. However, watches can be damaged if they are transported recklessly or incorrectly which could lead to a decrease in value of your time piece.
Where can I buy and sell luxury watches?
If you want to buy or sell luxury watches such as Rolex, Audemars Piguet, and Patek Phillipe, look no further. We have an extensive network for all luxury watches and can source on demand. Additionally, we stock in-demand watches, and the best part is, all our watches are sold for fair market value, meaning you may get the most for your money, and the cost price of your investment may be lower.
Alternatively, if you are looking to liquidate your luxury watches, get in contact for our consignment deals; we do our best to get the best price for your timepiece and have many happy clients to prove it. Depending on the watch, we may even offer instant payment, so get in contact today for a same-day quote.
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