Are Luxury Watches Really Good Investments?
Watches have ONE main function: to tell time. A Seiko watch cost a few hundred, whereas a Patek Philipe can cost up to 6 figures. Since all watches do the same thing, why are some people willing to pay 5 to 6 figures for a luxury watch? They are often being touted as an “investment”, but are they really?
Recently, we saw the launch of the Omega x Swatch MoonSwatch collaboration. The launch was inspired by the original Omega Speedmaster Moonwatch. The MoonSwatch range is made from Swatch’s bioceramic material. The range features 11 models in different colours.
This caused crowds and scenes in different parts of the world. In Singapore, police officers had to be called in to manage the situation. One London store had to close due to safety concerns.
The MoonSwatch range sells at S$372 a pop. Contrast this to the original Omega version, which retails from S$9,000. Little wonder that the launch broke the internet. It had people coming out in droves all around the world, for a fighting (no pun intended) chance to get their hands on them. Initially thought to be limited edition, people were selling them at a ridiculous markup on Carousell. However, it turned out that these watches are not limited edition after all.
Tracking the Performance of Luxury Watches
In the world of luxury watch collection, prices for in-demand classics from brands like Audemars Piguet, Omega, Patek Philippe, and Rolex are rising. In some cases, their prices have doubled in a year or two.
But should you be investing in this asset class?
Unlike the S&P500 index for stocks, there is no index that specifically tracks the luxury watches market. The closest is the Knight Frank Luxury Investment Index, which tracks the value of luxury collectables. The index tracks the performance of a theoretical basket of selected collectable asset classes using existing third-party indices. These assets include alternative investments like art, classic cars, and wine.
The best performing asset class is rare whisky, returning 428% over the last 10 years. Luxury watches had a total return of 108% over the same 10-year period. This underperformed the S&P 500, which returned more than 200% over the past 10 years.
Conclusion
Unless you’re a Saudi Prince with enough money to buy Chelsea football club, you’re likely better off investing in an index fund than a luxury watch (or any luxury asset). Out of the 10 luxury assets, only rare whisky is worth considering if you’re that inclined.