Before getting started, I must point out that I sell watches: I own a portion of the watch brand MONTA. Well before that brand existed however, my passion for horology began. I have great respect for brands like Rolex, Tudor, Patek Philippe, Audemars Piguet, etc. I have bought and owned watches from some of these brands. However, my opinion on approaching luxury watches as investments, vehicles for savings, or any other financial asset class is quite contrary to what you might hear elsewhere. Let me explain.
Invest In What You Know
I like to invest my money in something that I understand. I put my cash into things that will always be in need or otherwise have a correlative value driver (e.g. tech companies that offer great solutions to common problems, brands whose products correlate their value from an interest rate). Conversely, I think putting money into an investment that doesn't have a direct value driver is a bad idea.
When I hear about an art investor making a killing on a painting or sculpture, I have to ask why they knew that a particular artist or piece was going to increase in value. Spoiler alert: it's not just luck. When you talk to seasoned investors in things like art, cars, and watches, you’ll realize that they have devoted their lives to the pursuit of education in those fields. They dive into these topics not just as hobbies, but as means of mastering the markets that they put their money into.
I have an acquaintance who sells second hand, vintage German cars (quite successfully, might I add). His focus lies in convertible Mercedes Benz, and he does quite a few annually. I asked him what has brought him so much success. His reply was that he knows everything about the products that he sells. Crucially for vintage cars, he knows what is going to break and (approximately) when it is going to break. If certain items are past their useful life in a car offered to him, he won't invest his capital into it. This is his sole job, mind you. He has made selling vintage cars not a hobby, not something he dabbles in, but a profession. With that, he has customers approach him simply because of his name. The cars he has sold have increased in value to their customers, but when you consider his own profits on each car, he has made significantly more than any of them.
Love What You Buy
Talking more with my acquaintance about investing in cars as an individual, his opinion mimics mine. You should buy a car, watch, or piece of art because you love it, because you want it, because you look at it and it inspires you and brings you joy. Investing money in an item like a watch should give you immense personal pleasure. It is an accomplishment to purchase a Rolex: something that should bring you pride. You worked hard, saved up, and frankly, you deserve it. It should be worn, not hidden in a safety deposit box.
The issue I am seeing in the watch market today is that second hand watch sellers are giving investing advice. This seems questionable to me. They benefit from you believing that the asking price is a worthwhile investment in the watch’s future returns. Historically, and as it pertains to Rolex, this belief is not wrong. However, the timeline of a Rolex growing in value is measured in decades, not in months. I personally feel that anyone telling you to purchase a watch based on its future value is definitely not someone to trust. Even professional financial planners warn you that stocks can lose value and that you need to fully understand what you are investing in. There is an industry disclaimer found on all financial prospectus, that says “past performance is not guarantee of future results”.
I think the moral of this article is to invest in yourself. A watch will give you happiness if your goal is to enjoy it, however, money alone will not make you happy. If you are lucky enough to “get the call” and purchase a Rolex directly from an authorized dealer, you most likely own an item that is worth more than you paid for it. The enjoyment you will get from wearing it, keeping it for decades, and handing it down to a loved one will be priceless. Maybe I was wrong, investing in a watch will bring you a return you won't believe, it might just not be a financial one.