Watches as Investments

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As I’ve mentioned here before, despite requiring a fairly large chunk of money to buy one, a luxury watch is not an expensive luxury item compared to other discretionary spending.  In fact, chosen carefully, a luxury watch can be a great investment that you can enjoy every day.

With a very few exceptions, buying a watch brand new from an Authorised Dealer works on the same principle as buying a new car  – it’s worth less than you paid for it as soon as you leave the store.  Consequently when investment value is important to you, that degree of depreciation is unwelcome and so it’s certainly best to buy preowned, letting somebody else take that initial hit for you.

Clearly you need to enjoy wearing your watch so your primary concern is probably to make sure that you like what you’re wearing on your wrist – with that box ticked, it’s a good idea to try to predict the likelihood of an increase in value over time.

The future value of anything is a matter of supply versus demand – this is why the Rolex Daytona can be an excellent investment, because supply has always been artificially restricted by Rolex and its general desirability has always maintained demand.

With a current model watch, supplies are very difficult to predict for the future because the market could become flooded at any time – if for instance demand dropped or production increased suddenly.  With discontinued models however, the maximum level of future supply has already been established – there will never be any more tritium dialled Submariners in existence than there are today – and in fact the supply of really nice examples reduces constantly as they become damaged or put away ‘forever’ – and we can use this to our advantage.

Predicting demand is down to the taste of the potential buyer and this can be difficult, although not impossible if we make some basic assumptions based on easily understandable human behaviour. Imagine that you’re buying a car and it’s important to you that you should be able to sell it on easily in the future.  In this case it would be sensible to buy one in black or silver rather than pink or lime green because when the time comes it’s going to be much easier to find a potential buyer.

The same is true of watches – if investment value is important to you then it’s sensible to go for models which hold a broad appeal because that increases your potential market on resale.  The slightly more unusual models are less likely to be a good investment unless their supply is restricted – once again, this is a balance of supply and demand.

So pulling all of these factors together, you’re looking for a watch that:

a) You like

b) Lots of other people like too

c) Has limited supply

d) Has the potential for increased demand in the future

e) Has yet to reach its potential maximum value

You really need to tick all of these boxes because any one left unchecked could scupper your plan – These are some of the reasons why the current model 116500LN Daytona is a dubious pre owned investment at best.  Lets look at the facts:

116500LN Daytona – Pre Owned

a) Yup – Great watch

b) Yup – See a) above

c) No – Currently available in AD’s and could potentially become more available if supply is increased by Rolex

d) Possibly – see c) above

e) In the medium term, I think it has peaked – This watch is currently selling in AD’s for £9,000 (albeit with a waiting list) but people are paying £16,000 for them pre owned.  I think it will be a long time before that number increases.

Compare this with the 16523 Bi Metal ‘Zenith’ Daytona:

16523 Daytona – Pre Owned

a) Yes

b) Yes – not as popular as the stainless steel version but there are still a lot of people who love it

c) Yes – There will never be any more than there are now and the supply of Mint ones is reducing all the time

d) Yes – The stainless steel version is now selling for up to £13,000 so bi metal prices have to catch up soon as people see them for the great value watch that they are.  They will also be sought by people who might perhaps prefer a stainless one but can’t stretch to the £13k asking price..

e) Absolutely – see d)

If you consider these questions and buy the best example that you can then your money should be safe and you stand a good chance of your investment growing while you enjoy it every day.

I should add that this juncture that while I know a great watch when I see one, any comments that I make on potential investment value are purely my own opinion and should not be taken as investment advice.

Thanks for reading,

Giles

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