Unless you’ve been living under a rock, you know that inflation is plaguing the 2021 economy. There are several reasons for this we won’t deep dive into here.
Once the Federal Reserve raises rates, and the minimum wage increases, it’s hard to turn back. So many analysts and models point to this being longer term, not short-term.
In times like these, savvy investors and those looking to protect themselves financially are evaluating their portfolio and finding ways to diversify. There’s been much speculation regarding what types of financial options can hedge effectively against the economic landscape.
Opinions predominantly point to traditional vehicles like commodities, stocks, bonds, real estate, and those that are widely accepted by the masses as “proven”. And while these options are all viable, alternative solutions can provide a more beneficial inflation hedge and produce even greater returns.
One such alternative is luxury timepieces. Looked at more so as an expenditure and excessive desire in previous decades, timepieces have generated better yields for those who know the markets, and helped wise individuals amass wealth while they were enjoying and collecting amazing mechanical works of art.
Having even a few luxury timepieces vaulted in your collection can be an amazing asset to maintain and build wealth. There’s options for consideration that yield different results. There’s “blue chip” pieces like Rolex, Patek Philippe, or Audemars Piguet, and value-based brands like Cartier, Ulysse Nardin, Hublot, Panerai, and more. Much like a CFP or life insurance consultant would sit down with you to ask your financial goals/risk tolerance, you can actually approach timepiece investing in a similar way. Building a portfolio of even 5-10 pieces that you rotate can produce monthly net incomes to the tune of 5-6 figures, and yield 30-300%+ average returns over approx. 3-18 months.
More and more financial powerhouses are integrating alternative assets and luxury timepieces into their portfolios. For example, Kevin O’Leary, known from Shark Tank and an avid watch collector, said “timepieces are the best producing asset class he’s held over the past 5 years”. One example is holding sought after models like the Patek Philippe Nautilus 5711 in steel which originally retailed for $34,893 USD. If you had been lucky enough to get one at a boutique 2 years ago, you could command a whopping 280% return over the course of that 24 months (approx. 62,000 USD) for simply enjoying a nice watch.
So what makes luxury timepieces a great choice to protect against inflation? Here are 5 reasons why they work:
- Intrinsic value. Luxury timepieces are often made of precious commodities like platinum, gold, rose gold, steel, palladium, and more. These commodities built into the design of the timepiece help ensure the asset itself will always be worth something even if the brand name and demand fluctuates. A good example of this is an Audemars Piguet Royal Oak Offshore “Brick”. It’s an all rose gold watch made by a brand that’s had prowess for generations. It’s also made using a full brick of gold. So by owning one of these pieces you’re essentially not only benefitting from the design and brand appreciation, but also the fact that in dire situations you could melt the gold and still retain the value from that asset.
- Demand Stability. Contrary to some opinions, the introduction of more tech-based wearables has not lowered the demand for luxury timepieces. The market for luxury goods in general (and specifically timepieces) is well into the billions and only growing. Timepieces were able to survive the quartz battery movement of the 80’s, and are continuing to build more of a following with the younger generation even though apple watches and wearable tech are more prominent. The reason is, the benefits from luxury pieces aren’t about timekeeping accuracy. It’s about art appreciation, status, a reminder to slow down to enjoy life, and invest in something that can retain value. Much like how a manual drive Porsche will never go out of style or demand to a collector, even as electric-based vehicles take the reins.
- Mobility of Money. There’s almost no other asset that can be maintained, traveled with, and cashed out as easily. If there were a state of emergency in your country you could take a watch roll with you on a plane instantly without an issue and cash out your Rolexes pretty much anywhere for the same, if not additional value if purchased at the right price. This movement of money across borders and the ability to access the assets without having to fill out a form at the bank are how dealers and jewelers create cash flow out of seemingly nowhere. Some can even make watches “disappear” off the books in this capacity (which I don’t condone).
- Limited Restrictions. Unlike real estate and other commodity contracts, timepieces have limited restrictions, barriers to entry, and paperwork to be filed. No pesky months worth of waiting for approvals and regulations to clear. No headaches from getting in and out of the asset itself. You can literally buy and sell a timepiece on the same day.
- Liquidity. If you’re unfamiliar with the luxury watch markets, the misconception is there’s not much liquidity. This perspective is naive. The liquidity for watches is and always will be exceptional. More and more timepiece enthusiasts and collectors are being born daily especially with the emergence of platforms like Watch Trading Academy that educate consumers how to buy/sell/trade alternative assets. Also, there is a bottom cash value to certain timepieces, meaning no matter the economy status we’re in, certain brands/models have a floor. This means the price will never drop below a certain threshold due to many fundamental factors. Dealers and jewelers will always be buying pieces that retain market value and are willing to cut a check in any economy. After all, money is made when people need to liquidate, and money is made when people want to buy. So the ebbs and flows don’t affect the bottom line much at all.
Overall, if you haven’t considered alternative assets like timepieces as part of your investment strategy, you might seriously want to. This asset class is getting more popular by the day, especially with the increase of digital currency which can be used to buy watches, NFTs, and the ongoing lack of trust in the government financial programs. If you’re experienced with luxury timepieces, or even if you know nothing about where to start, you can learn how to become a savvy investor in them step-by-step at places like Watch Trading Academy. These programs were built out of the lack of transparency in the marketplace not being provided to give power to individuals and consumers. With this platform, and more info coming on daily, there’s no excuse as to why anyone can’t take advantage of the benefits these alternative assets provide.