Pre-Owned Luxury Watches Give S&P 500 a Run for Its Money

Ladies and gentlemen hold onto your wallets because the pre-owned luxury watch market is officially hotter than the surface of the sun (well, almost). According to a new report by Boston Consulting Group and WatchBox, pre-owned luxury watches have outperformed the S&P 500 index since mid-2018, with some top Swiss brands appreciating by an average of 20% a year (yeah, you heard that right) 🤯.

Watches Have Out Performed S&P 500 Since 2018

While the S&P 500 index averaged annual returns of 8% from August 2018 to January 2023, a basket of pre-owned watch models from top Swiss brands grew at more than twice the pace, despite the decline in prices of some pre-owned models since the market peaked in the first quarter of 2022 (oops). Although some pre-owned models, such as Rolex Daytonas, Patek Nautilus, and AP Royal Oaks, saw a decline in prices by as much as a third, prices for a basket of independent brand watches, including FP Journe, H. Moser & Cie, and De Bethune (which is majority-owned by WatchBox), returned 15% over the same period (not too shabby).

Long-Term Investment: Stocks Retain Edge

Now, let's not get too carried away. Over a longer period (between 2012 and 2022), stocks outperformed watches as an investment asset. The S&P 500 had a compound annual growth rate of 12%, while Rolex, Patek, and AP watches averaged 7% (so stocks still have some street cred).

Luxury Watches as an Alternative Asset Class

However, the report suggests that luxury watches could be an alternative asset class to traditional investments such as stocks, bonds, art, and wine (finally, something that doesn't require a sommelier). Watches from top Swiss brands such as Rolex, Patek Philippe, and Audemars Piguet are considered to be high-end luxury assets that can retain their value or even appreciate over time (a.k.a. the gift that keeps on giving).

Conclusion

In summary, the report's findings indicate that pre-owned luxury watches could be a viable investment option for those looking to diversify their portfolio beyond traditional asset classes (I mean, who doesn't love a good wrist party?). But as with any investment, it's important to note that there are risks involved and past performance is not a guarantee of future results (so don't bet the farm on that vintage Rolex just yet).

Pepper's Takeaways: How Buying Luxury Items Can Translate into Useful Investments

Investing in luxury items, such as pre-owned watches, can offer more than just a stylish accessory. While investing in traditional assets like stocks and bonds can be a great way to grow wealth, luxury items can provide diversification and a hedge against inflation. When purchasing luxury items as investments, it's important to do your research, buy from reputable dealers, and understand the market dynamics that drive prices up or down.

For example, certain brands or models may be more popular in different regions or among different demographics, so understanding the market can help you make informed decisions. Ultimately, investing in luxury items requires a long-term view and a willingness to take some risks, but for those who do their homework, it can offer a unique and rewarding path to building wealth.