A Beginner’s Guide on How To Invest In Watches
In the ever-evolving landscape of investments, traditional assets like stocks and real estate are often complemented by unique opportunities in alternative markets. One such niche that has gained significant traction in recent years is investing in luxury watches. Beyond being exquisite timepieces, watches have emerged as viable assets, appreciated for their craftsmanship, heritage, and potential for value appreciation. In this beginner’s guide, we will explore the various avenues on how to invest in luxury watches, delving into the world of horological investments and highlighting innovative platforms that offer unique co-ownership models.
why Invest In Watches?
What are the main reasons to consider investing in luxury watches? Here are three primary factors:
1. Appreciation in Value: Luxury watches offer the prospect of value appreciation, with numerous factors contributing to the potential increase in their prices. This makes them an intriguing option for investors seeking profitable opportunities.
2. Portfolio Diversification: Real assets, such as luxury watches, serve as effective hedges against inflation and present a valuable means to diversify your investment portfolio. By incorporating these tangible assets, investors can enhance the resilience of their overall investment strategy.
3. Personal Passion: While the primary objective of investing is financial gain, there’s an added dimension when it comes to watches. For enthusiasts, investing in and wearing a watch can be a more enjoyable and personally satisfying experience compared to traditional investments like mutual funds.
The Deloitte Swiss Watch Industry Study 2023 highlights that the primary motivation, among those purchasing a watch as an investment (24%), is the diversification of investment portfolios (34%).
Understanding the Watch Market
Understanding the watch market can be difficult and complex, but there are two main aspects to consider when evaluating a new opportunity:
- Historical Appreciation:
Watches, especially those from esteemed brands with rich histories, have shown a historical trend of value appreciation. Limited editions, vintage pieces, and watches with unique complications often become sought-after collectibles. Limited-edition watches or those with rare features tend to have a higher potential for value appreciation. Rarity, combined with exceptional craftsmanship, makes these watches desirable among collectors.
- Brands and Heritage:
Investing in watches often involves understanding the prestige and heritage associated with specific brands. Established names like Rolex, Patek Philippe, and Audemars Piguet not only represent craftsmanship but also have a strong resale value.
Traditional Paths to Watch Investment
There are two main traditional path to enter the watch investment world:
- Buying and Holding: The most straightforward approach to watch investment is buying timepieces and holding onto them as their value appreciates over time. This method requires an understanding of market trends, brands, and the ability to identify watches with potential.
- Auction Houses: Participating in watch auctions, either online or at renowned houses like Christie’s or Sotheby’s, provides a platform to acquire rare and valuable timepieces. Auction prices can be influenced by market demand and the historical significance of the watches.
Innovative Investment Models
Two new innovative models have emerged in the last few years, confirming the high demand for access to this asset class by many retail investors worldwide:
- Watch Funds: Some investment firms offer watch funds, allowing investors to pool their resources to acquire a diverse portfolio of luxury watches. This approach provides a level of diversification and professional management of the investment.
- Fractional and Co-ownership Models: Emerging platforms like Elephants introduce co-ownership models, where investors can collectively own a luxury watch. This innovative approach democratizes luxury watch ownership, offering shares of a high-value watch to multiple investors. Fractional ownership platforms allow investors to own a portion of a high-value watch, making luxury watches more accessible. These models open up opportunities for a broader audience to invest in watches, providing a unique blend of ownership and investment potential.
How To Invest In Watches: Due Diligence and Risk Management
Now that we have listed the main paths to watch investment, let’s review the three main steps to conduct qualified due diligence, limiting the risks associated with this asset class:
- Research and Education:
Successful watch investment requires a deep understanding of the market. Investors should research brands, historical trends, and the factors influencing the value of specific watches.
- Authentication and Documentation:
Verifying the authenticity of a watch is crucial for its investment value. Proper documentation, including certificates of authenticity and service history, adds to the watch’s credibility.
- Market Trends and Demand:
Staying informed about market trends and demand for specific brands or models is essential for making informed investment decisions. Understanding consumer preferences and shifts in the market is key to anticipating potential appreciation.
Exit Strategies and Liquidity
Two are the main exit strategies for selling your watches when the time comes:
- Private Sales and Auctions:
Investors may choose to sell their watches privately or through auction houses. Private sales provide flexibility in negotiating prices, while auctions may attract competitive bids, potentially maximizing returns.
- Secondary Markets:
Some platforms (Chrono24, Wristler, WatchBox, Bezel to name but a few) and forums specialize in the secondary market for luxury watches. These platforms facilitate the buying and selling of pre-owned watches, providing investors with liquidity options.
The Future of Watch Investments
There are certainly many innovative solutions emerging in the watch investment sector. Two of them, in particular, are the ones to carefully monitor as they have a significant impact on the future of this asset class:
- Technological Integration:
The integration of blockchain and other technologies is likely to enhance transparency and traceability in the watch market, potentially influencing investment strategies.
- Emerging Brands:
While established brands dominate the market, emerging brands with innovative designs and unique propositions may present opportunities for investors seeking growth potential.
How To Invest In Watches: Conclusion
Investing in watches offers a unique blend of appreciation for craftsmanship, a sense of ownership, and the potential for financial gain. Whether through traditional paths like buying and holding or exploring innovative co-ownership models, investors have a range of options to consider. As with any investment, due diligence, research, and a clear understanding of market dynamics are crucial. With the right approach, investing in watches can be a rewarding journey, providing both tangible assets and a connection to the rich heritage of horology.