They can. But are they a good one?
Luxury watches, jewelry, art, fine wine, antiques and classic cars are all collectibles that regularly generate news around the significant sums of money they can be worth and change hands for. That old painting sitting in the attic that was inherited from Aunt Julia, or Grandad’s old timepiece, turning out to be worth tens or hundreds of thousands of pounds is a not uncommon, if overly optimistic hope that many have harbored at some time or other. However, there is a significant difference between an item being worth a significant sum of money and it being an ‘investment’.
Nonetheless, articles characterizing luxury watches and other collectibles as ‘investments’ abound and there is no shortage of companies marketing collectibles to potential buyers by emphasizing the term. So, let’s take a look at the case for and against the merit of collectibles, and luxury watches more specifically, being considered as an investment.
What is an Investment?
A logical starting point would seem to be defining what an ‘investment’ is and then assessing whether luxury watches fit comfortably, or even tenuously, within that definition. The Oxford English Dictionary’s definition of an investment (noun) is as follows:
The action or process of investing money for profit. A thing that is worth buying because it may be profitable or useful in the future. An act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.
On these variations of the definition of the word, it would appear that the purchase of a luxury watch could be, theoretically, regarded as an investment, if a watch was acquired under the belief and/or hope that it might be subsequently sold for a higher value.
Investopedia’s definition of an ‘investment’ also potentially works:
“An investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit”.
On these definitions, what constitutes an investment is largely defined by the investor’s intention when buying, or investing in, an asset. Even the UK government’s ‘The Money Advice Service’ appears to acknowledge the potential ‘investment’ status of collectibles such as luxury watches with the statement:
“Collectibles like gold and jewelry, art, antiques or fine wine can make interesting investments and might be a good way to diversify…”
However, it is the continuation of the statement which is perhaps key:
“– but you need specialist knowledge to get it right, and you might spend a lot on storage, maintenance and insurance”.
The conclusion that must be drawn is that buying a luxury watch can indeed be considered as an investment. However, it seems to me that the real question should now become a different one.
Are Luxury Watches a Good Investment?
An investment is largely about intent. The subsequent realization of the expected profit, or otherwise, defines whether or not the acquisition was a ‘good investment’. So, how likely is it for a luxury watch to gain in value and be able to be resold at a profit? On the face of it, a recent investment in the mid-range ($4000-$9000) vintage watch market would have been a very good one. Average prices have seen growth of 20% in the past two years and 50% over the past four.
However, this could suggest that it is too late for new investors in vintage watches to achieve similar profits. Or, it could be the beginning of an upwards trend, though of course such levels of appreciation are unsustainable long term.
The generally accepted expert opinion of collectibles, watches included, is that while they can prove to be good investments, they shouldn’t really be considered as pure investments. Even watch enthusiasts would agree. Ariel Adams, founder of watch enthusiast blog ‘ABlotoWatch.com’, says:
“Buying low and selling high doesn’t typically work so well in the watch world.”
The problem with collectibles as an investment is that there is no objective market price, as there is with equities for example, though there are of course price tendencies. A buyer has to be found and the value is the price a buyer is willing to pay. If an intermediary is used to sell a piece, they will of course want to take a retail margin, which could significantly impact the potential for profit.
The Experts’ Advice
The general advice when it comes to investing in any collectible, watches included, is that they can be part of a more traditional investment portfolio and a useful value hedge as their value is not closely correlated to financial markets. If the stock market crashes, the value of a watch probably won’t drop to mirror that. However, they shouldn’t be considered as a stand-alone investment strategy. Collectibles should be considered as a passion and owned for their own sake. They can be a useful store of value and if their value increases and they can be sold for a profit at some future date, this should be considered as a bonus rather than their raison d'être.
So, when it comes to investing in vintage watches, as a store of value or simply a hobby, what should you have in mind? Tom Pozsgay, Director of Watches & Watch Acquisitions at WP Diamonds advises:
"Certain watches retain more of their value than others. For example, the Rolex watches and Patek watches will retain more of their value then other brands. However, the advantage of buying a pre-owned watch is that when evaluating a watch, it usually is based on the price of a new watch, and thus the pre-owned watch will retain more of its value. As I always like to say....'Only you know its pre-owned.'"
So, pre-owned luxury watches represent a better store of value than new models and certain brands, such as Rolex, hold their value better than others. This is a sentiment which is echoed by Adam Craniotes, a watch writer, collector, and founder of Red Bar, a group of watch aficionados, who says:
“I hate to say it, but in this price range ($4000-$9000), vintage Rolex—and now vintage Tudor, ‘the working man’s Rolex’—are the best game in town if you’re looking for an investment-grade piece that doesn’t have to sit in the safe.”
Another option is investing in a pre-owned watch before it becomes ‘vintage’. Paul Altieri, a watch expert and CEO of leading pre-owned and vintage Rolex dealer Bob’s Watches says in an article for Time Magazine:
“After 20 or 30 years it starts to appreciate gradually in value—that’s what’s happened to almost all Rolex watches”.
So, if you do want to invest in a watch, go for the small number of brands that have been shown to hold value reliably, go pre-owned rather than new and, if you are prepared to wait, buy a model a few years away from entering the ‘vintage’ age range. But, most of all, do it because you love nice watches!