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High-end mechanical watches are one of the most demanded luxury products, which has been sought after by royalty, nobility and upper classes for centuries. The most complicated and rare models are also status symbols and strong growth of the super-rich people worldwide means that demand and hence the prices, go up every year.

Let’s say you had $9,000 to invest. With that amount of money you could have bought a steel Rolex Datejust 126334 with a sunburst blue dial, which is particularly highly coveted. Today (only three years later) you could sell that same watch easily for $11,500 [1].

So in the last three years this edition has gained about 25% in value. Compare that to the lousy interest rate your bank offers and you’ll see why so many people are allocating their funds to this glamorous asset.

Low risk and stable investments

The great thing about it is that you don’t need to be super-wealthy to invest in watches. There are a growing number of online marketplaces which are aimed at buyers with a modest budget.

Patrick O’Connell, a lawyer and aspiring investor from London

Scarcity creates value. Demand for certain models exceeds the production capability, so to buy them directly from Rolex you’ll have to spend several years on a waiting list. People who would like to buy their Rolex faster, will have to pay the premium, thus the prices on the market go up and Rolex also increases their recommended retail price to follow the rise. As a result, the price of a steel Rolex has never depreciated since 1970s.

Luxury watches is the perfect investment since the risk is substantially lower than for investments in the stock market. Whereas share prices are rather volatile, a high-end Swiss watch provides stable returns year after year and rarely decreases in value.

Even during the coronavirus outbreak there hasn’t been much volatility on the luxury watch market. The prices of the most in-demand brands in the world like Patek Philippe, Rolex, Audemars Piguet and Richard Mille in general have continued their annual increase of 5% since March 2020 [2].

Capital-preserving asset

“I was really disappointed after I lost money by investing in products that I didn’t quite understand, so I decided to turn to real assets. Because in case with wristwatches, it’s very clear what you’re buying.

Michel Pont, an art collector from Paris

The luxury watch market is valued at approximately $7.5 billion and is forecast to reach a value as high as $9.3 billion by 2025 [3], and it’s expected to grow annually by 6.2% [4]. This is due to a combination of several factors, including limited production, increasing demand and rising production costs.

This means the luxury watch investor will enjoy stable and solid returns during the good times and the strong capital preserving properties during crisis and recession.

 




[1] Chrono24.com

[2] Kuek Ser Kwang Zhe (2020, September 1). Alternative Assets: Luxury watch returns hold up amid pandemic. Retrieved from https://www.msn.com/en-my/money/topstories/alternative-assets-luxury-watch-returns-hold-up-amid-pandemic/ar-BB18zzb2?li=BBr8Hnu

[3] Luxury watch market value worldwide from 2018 to 2025. Retrieved from https://www.statista.com/statistics/940452/luxury-watch-market-value-worldwide/

[4] Luxury Watches worldwide. Retrieved from https://www.statista.com/outlook/21020100/100/luxury-watches/worldwide