Luxury watches, especially Rolex, Patek Philippe, Audemars Piguet, have become increasingly popular investment assets in recent years. Driven by limited supply and surging demand, prices of luxury watches keep setting new records at auctions. Many investors view luxury watches as alternative investments that can diversify their portfolios. This article will analyze the key factors that make luxury watches worthwhile investments in 2023 and compare them against other alternative assets.
Limited supply and high demand push luxury watch prices ever higher
The primary reason that makes luxury watches profitable investments is the imbalance between limited supply and ever-growing demand. Unlike mass-market watches, luxury watch brands such as Rolex intentionally limit production to maintain exclusivity and brand image. However, demand for these watches has surged rapidly in recent years, especially in China. Auction results show Patek Philippe, Rolex, and Audemars Piguet pieces regularly fetching 2-10 times their original prices. Top investment pieces like Rolex Daytona and Patek Philippe Nautilus often have waiting lists years long at retailers. Their prices at the secondary market are even higher. This supply-demand imbalance is expected to continue in 2023, suggesting luxury watches will remain highly profitable investments.
Luxury watches as inflation hedge and store of value
Another factor that makes luxury watches promising investments is their ability to hedge against inflation and act as stores of value. When inflation rises, luxury assets like watches, arts, wine tend to maintain their value better compared to paper assets. For example, the median price of Rolex watches has gone up around 7% annually in the past decade, easily outpacing inflation. There are several reasons behind this. Firstly, the watchmaking craftsmanship and precious materials ensure intrinsic value. Secondly, luxury watch brands limit supply regardless of demand. Lastly, as financial markets become more volatile, investors increasingly turn to tangible assets like watches as stores of value. This unique characteristic shall continue to make luxury watches worthwhile investments in 2023 as global inflation remains high.
Resilient and uncorrelated returns
Data has shown that luxury watch investment returns have low correlation to stocks and bonds. For instance, Rolex prices surged 27% in 2020 despite the stock market crash and economic recession. This resilience comes from watches’ tangible nature and psychological associations with achievement and success. Moreover, the luxury watch market is not affected by macroeconomic factors to the same extent as financial assets. Hence adding watches into an investment portfolio helps reduce overall volatility and diversify risk. Especially for investors concerned about a potential stock downturn in 2023, allocating funds into luxury watches could be a wise move.
Luxury watches outperforming other alternative assets
Analyses from investment banks like Morgan Stanley and BCG have shown that in recent years luxury watches have generated higher returns than most other alternative assets including art, classic cars, wine, etc. For example, BCG found the value of Rolex, Patek Philippe and Audemars Piguet watches grew around 20% annually from 2018 to 2022, outpacing all other collectible categories. And watches carry lower risk than volatile assets like cryptocurrencies. What’s more, watches are portable and easier to store or sell compared to real estate and fine art. Based on historical performance and advantages, experts predict luxury watches will continue to be top-performing investments in 2023.
In summary, key factors such as supply-demand dynamics, inflation hedging ability, uncorrelated and resilient returns all contribute to luxury watches’ investment value. Their outperformance over other alternative assets is expected to continue in 2023. For investors looking to diversify portfolios and hedge against inflation, quality luxury watches deserve serious consideration.