Investment Watches

Investment watches and luxury timepieces (and there is a difference) are coming to the fore as alternative investments, not just status symbols for the rich and famous. Increasingly, investors are looking to part their money in alternative assets other than wine, art, and cryptocurrencies as a way to turn money into more money.
This guide explains what you should know about watch investing before you shop around or harass your nearest dealer. We will examine the pros and cons of watch investing, how to begin, and what pitfalls to watch out for. Read on to find out if a watch could be more than just a new shiny object for your investment portfolio.

What Are Investment Watches?

“Today’s timepieces that will become tomorrow’s vintage classics.” That’s the rosy glow Esquire magazine bestows on watches and their potential as a worthy asset. But is it realistic?

Investment vehicles come in many forms—stocks, bonds, real estate, cars, gold, futures, art, jewelry, and watches, to name just a few. Watches are a niche investment space typically occupied by those who appreciate rare timepieces and have significant spare cash to hand. The market is particularly excited now, and there are waiting lists for the most coveted models. An article by Vanity Fair notes that even thieves are focusing on luxury timepieces. In Beverly Hills last year, a perfect specimen of a Richard Mille RM 11-03 Flyback Chronograph was pulled off a wrist at gunpoint in a café in broad daylight.

The investment watch market, like any other, is powered by supply and demand and influenced by economic and political events. And, it is true that it is not just luxury watch brands that carry heft where values are concerned. Your circa 1979 Timex that was originally bought for single-digit dollars or pounds could be worth hundreds if there is limited supply.

When did watches first appear?

People first wore watches in Switzerland. According to the watchmaker Shinola, when John Calvin banned wearing jewelry in 1540, people circumvented the restriction by wearing something more practical, a device that told time.

Watches were worn as pendants by women and men, but when King Charles II introduced a waistcoat as a new fashion item, pocket watches came to the fore, and wristwatches became popular around the same time. As watches became more sophisticated and luxury brands were differentiated from cheaper brands, they became a status symbol and an indicator of wealth.

Collectors were attracted to the complexity and craftsmanship of timepieces, but appreciation in watch value has been rare. Watch investing was more of a buy-and-hold strategy with the added bonus that watch owners could show off their acquisitions. It wasn’t until 2016 that the watch market suddenly gained traction, and watches that went for around $20,000 retail were sold for millions.

The unintentional catalyst was the actor Paul Newman, who appeared in a magazine wearing a Rolex. The Italian watchmaker savvily used the movie-star image to heavily market their watch. It worked, and the watch was branded the Paul Newman Daytona. The original watch was sold for $17.8 million at auction and was the most expensive wristwatch ever sold. It was on the market in the 1990s for $8,500. Vintage watch collectors never looked back.

What Is the Attraction of Investment Watches?

Aside from the potential appreciation in value, watch collectors and investors appreciate the beauty and craftsmanship of watches. Watches also function as jewelry that can be worn and enjoyed. Fine watches can be a status symbol, and your vintage Patek Phillipe will be noticed at cocktail hour conversations. Also, watches are an alternative asset, like cryptocurrency. However, they are not subject to the same volatility that afflicts crypto markets.

Watches can be easily bought and sold, and they do not require much upkeep. Unlike a vintage car, watches suffer far less wear and tear and require less maintenance. They do not deteriorate as they sit and time passes because they are constantly moving.

Watches are portable. Unlike a luxury yacht, they can be easily transported in a suitcase, which is highly convenient if your country of residence invades another, and severe sanctions force you to stash your assets elsewhere. After Russia’s recent invasion of Ukraine, jewelers have reported a surge in watch buying.

Why Invest in Watches?

Watches can complement a stock portfolio and add diversification if you have money to spend. Like any passion investment, be it art, fine wine, or rare whisky, they offer a comfortable place for investors to put their money because they can be enjoyed regardless of their performance value wise. Watches are a way for an investor to follow their passion if they love exquisite timepieces. They’re not just a pleasure on paper; they’re a practical adornment on the wrist too.

A vintage Rolex or Philippe Patek is akin to a quintessential blue chip—perhaps without the accompanying market volatility—for those who can afford to splurge at the top end. However, alternative investments have the added advantage of being a safe-haven asset. When specific industry markets take a downturn, watches, whisky, art, or bitcoin can take off. If well-chosen, a luxury watch will increase in value and balance out a portfolio to some extent.

Lastly, the vintage watch market is growing, which means more money is chasing the assets boosting the entire horology space. According to CNBC, since the Covid-19 pandemic, there has been a boom in watch buying. According to McKinsey, “pre-owned watch sales hit $18 billion in 2019 and could top $30 billion by 2025.”

In response to this burgeoning market, startups are springing up to become the eBay of the watch space, buying, selling, and flipping pre-owned and vintage watches on digital platforms. Hodinkee and Chrono24 are good examples, as are Watchfinder, WatchBox, and Watchmaster. Germany-based Chrono24 raised 100 million euros ($116 million) from investors and was valued at over $1 billion.

That makes it the first unicorn in the watch reseller segment. The company claims to carry 500,000 watches from over 3,000 retailers and over 30,000 private sellers.

What Are the Pros and Cons of Investing in Watches vs. Dividend Investing?

Watch trading comes with its advantages and disadvantages, and many of these may not immediately occur to the novice investor. For example,

Pros

Enjoyment – Watches are not just a vehicle for returns; they are also an emotional attachment that can be enjoyed overtime.

Emotional Value – Watches can be a milestone marker, a way to celebrate and commemorate a significant event or special occasion.

No Depreciation – New watches will lose value initially and in the first year, but buying on the secondary market avoids depreciation.

Style – For the trendsetters among us, vintage watches never go out of style.

Cons

Illiquidity – Although watches can be traded, doing so takes time. Stocks are easy to sell on an exchange, but watches are a niche market. Finding the right buyer and the right price for your Rolex or Tudor sport model could take longer than you think.

High Transaction Costs – Large auction houses like Philips or Christie’s charge buyer premiums as high as 25 percent. In the vintage market, where there are plenty of “frankenwatches,” vintage dealers charge for their services in identifying fakes and may add on as much as 35 percent to the true market value of a watch.

Patience – Finding the right piece at the right price takes patience and may mean passing over an opportunity. Returns may only be seen over the long term.

Emotional attachment – A watch does not provide annual dividends. It must be sold to provide returns, and that might be difficult if the owner has an emotional attachment to the asset.

How Can Novice Investors Start Investing in Watches?

If you are committed to investing in watches, do plenty of research to determine which brands and models are popular or increasing in value. Make a realistic offer on a watch. Negotiate a price point that allows you to make money as the market appreciates.

Take good photos of the watch and put it up for sale with a markup. If the market is good for the watch, and you can wait to sell it, put the price up and enjoy the watch for a month or two.

For example, let’s say you have $5,000 that you want to invest, and you have your eye on an Omega Speedmaster, also known as the Moon Watch. After some research, you decide to make an offer for $5,000. Based on the price trend, which is showing a steady uptick, you list it for $6,300. You sell it on eBay in three days for a profit of $1,300, not considering shipping costs. If you are patient, you might sell it for $7,000 and profit even more.

Be aware that buying online is fraught with risk. Marketplaces like eBay and Chrono24 can be trusted for the most part, and they escrow services for your protection. Another tip is to look out for end-of-production runs. When production ends for a watch, prices go up as investors try to grab the remaining supply.

What Are the Risks with Investment Watches?

We mentioned the risks of buying watches online, but other risks could affect prices and your success as a watch investor.

Political Risk

Watches are a luxury good and, as such, they will be one of the first things to take a hit when an economy takes a downturn and people are forced to spend on necessities. Luxury investing goods are heavily influenced by demand from Russia and the Middle East, which are regions subject to geopolitical upheaval risk. Expect events in these regions to impact the demand and sales of watches.

Trend Spotting

Other than Rolex and Patek Philippe, few brands really hold their value and appreciate. To be a successful watch investor, you must be very good at spotting trends and potential moneymakers. If you are not in tune with trends or like obscure brands, you might struggle to make money investing in watches.

Finding Inventory

The best pieces are, of course, difficult to find. Without a strong relationship with a dealer, it will be challenging to find watches that will greatly appreciate, particularly in a hot market. As you buy and sell more watches, you will connect with other buyers and sellers who appreciate luxury timepieces, which will create more opportunities. Therefore, to find the best deals, you have to build relationships and be a valued repeat customer.

Fakes

If you don’t buy from an authorized dealer, you could find yourself buying fakes. Believe it or not, it is estimated that there are over 40 million fake Swiss watches produced each year. This is a particular problem for the vintage watch market.

What Is the Criticism with Investment Watches?

Successful watch investors have two things going for them—lots of spare cash to buy the most exclusive brands, and an established relationship with a dealer. Just buying a watch online is unlikely to yield a significant return, and certainly not in the short term. That excludes many investors from the market.

Also, the value of a watch and its appreciation is dependent on supply to a large extent and trends to a lesser extent. Unless you have a keen eye for style and exclusivity, watches may not be the best investment for you.

One of the main arguments for watch investing is that you can wear the asset and enjoy it as it appreciates. However, many proponents of watch investing warn that watches are delicate, particularly vintage timepieces, and wearing them will cause wear and tear that will reduce their value. A $250k Daytona will be fine in a rain shower. A $25K Patek Phillipe Calatrava? Not so much.

5 Tips for profiting from investment watches

Here are some general tips for novice watch investors.

Start with vintage

Vintage watch prices hold their value and have been steadily creeping up over the years. They are more likely to show a return in the short to medium term.

Go for looks over function

Unlike with cars, the outside of the watch is mostly what matters when it comes to value, not the interior movement. Focus on the aesthetics.

Buy from a dealer

Part of what you pay for when you buy from a reputable dealer is piece of mind that the watch is not a fake. “Frankenwatches,” watches pieced together with some real and some fake components, are ubiquitous, so be willing to pay a premium for that piece of mind.

Consider fraction investments

Fractional investing gives you partial ownership of luxury timepieces by joining a group of like-minded investors. The Watch Fund was started by Dominic Khoo and allows members to make fractional investments in ultra-high-end watches. The starting investment is fairly steep, however, at $250,000 and you don’t have any say in the watches that are purchased. Piece and Koia are other options for fractional investing.

Build relationships with dealers

The world of collectibles revolves around buying power. You need access to deals. Access is easier if you  build relationships with dealers, retailers, and industry players. To curry favor from a dealer, try buying jewelry from them first to show your commitment.

Investment Watches: General Terminology

Automatic winding movement: A watch that does not need to be manually wound daily. A rotor is a weighted pendulum attached to the back of the watch that automatically winds the components.

Caliber: This designates the model. Watch manufacturers number their calibers based on their own identification system.

Case: Typically made of metal, this part of the watch varies in size. The case houses the dial, battery, movement, and other internal parts of the watch.

Guilloche: Intricate engraving on a watch to create patterns.

Jewels: Synthetic gemstones, often made of sapphire or ruby. They act as directors for gear trains in a mechanical watch to reduce friction and wear.

Quartz Movement: This describes the operation of an electronic watch by a quartz crystal. The crystal turns and emits electricity when mechanical pressure is applied.

Skeleton Case: A transparent case on either the front or the back of the watch that shows the watch’s various movements and functions.

Superlative Chronometer: A Rolex trademark that refers to a Rolex chronometer. There is only one grade of chronometer, and the terms “Superlative Chronometer,” “Certified Chronometer,” and “Chronometer” all mean the same thing.

Tourbillon: A mechanical device in the watch that mounts the escapement and balance on a rotating platform cage to eliminate positional timekeeping errors.

Conclusion

It’s true that watches are not subject to the dramatic fluctuations in value that afflict alternative investments like cryptocurrencies. However, unless you have a lot of money to spend on elusive, luxury brand timepieces, they will also not show the short-term rapid gains that volatile assets sometimes deliver.

For watches to comprise a substantial portion of an investment portfolio, you really need an established relationship with a dealer to find authentic pieces with appreciation potential. Such treasures will not come cheap or be easy to find. For one thing, sourcing problems and economic downturns since the COVID-19 pandemic have limited inventory as investors have increasingly turned to alternative assets like watches, art, and other collectibles as safe-havens.

The takeaways from this guide are if you love watches, have money to spend, and are attracted to the glitz and glamour of some expensive bling on your wrist, buy luxury watches. On the other hand (no pun intended), if you are seriously looking for short to medium-term returns and have little interest in exquisite timepieces, take your wallet elsewhere.

FAQs

Which brand of watch is best for investment?

According to Chrono24 Magazine, the number one watch brand to invest in is Rolex. Another popular brand among investors is Omega, with its famous Omega Speedmaster and Omega Seamaster models as well-known investment pieces. Other brands to watch for are Audemars Piguet, Patek Philippe, Vacheron Constantin, F.P. Journe, and Czapek.

What drives a watch’s value?

A watch’s value is driven by its reputation for quality and good old economics—supply and demand. Brands that constantly manufacture reliable and exquisitely designed pieces made with quality metals and super craftmanship will naturally retain their value. Beyond that, limited availability and high demand will further push up the price.

When a watch manufacturer announces they will discontinue a line, there will be a rush to buy any remaining watches. This is because there will be limited supply in the future. Discontinued lines will command extremely high prices on the secondary market. Chrono24 Magazine reported that when the Patek Philippe Nautilus 5711/1A was discontinued in 2020, the market price skyrocketed over the next year by over four times its list price.

If watch prices are going up, is this a bubble likely to burst in the next few years?

There may be instances where a certain watch drops in value. Yet with more investors joining the market, there is no reason to anticipate a collapse. There is also a greater interest in luxury watches from Asia. With a growing global market, watches with relative commercial success today may be sought-after by collectors in the future. In addition, demand will continue to outweigh supply, further supporting the luxury watch market.

What are likely to be the most sought-after watches in the future?

Rolex, Patek Philippe, Audemars Piguet, and Richard Milles are the leading brands for investors, according to Tim Stracke, CEO of the watch resale site Chrono24. These brands limit their supply of watches and value their reputation for quality over short-term profits, which buoys the value of their timepieces. Some specific sought-after watches now and into the future are likely to be Audemars Piguet: Royal Oak Jumbo, Reference 15202ST; Patek Philippe: Steel Nautilus, Reference 5711, Omega Speedmaster “First Omega in Space; ”Rolex: GMT, Reference 1675; Rolex: Submariner, Reference 16800; Patek Philippe: Nautilus, Reference 3700; Longines Vintage Chronograph, circa 1940-1950s; Omega Speedmaster, Reference 2998-2; Audemars Piguet: Royal Oak, Reference 5402; and the Rolex: Gilt-dial Submariner, Reference 5513.

Are watches a good investment if you don’t have thousands to invest?

If you have less than $5,000, watches are probably not a good investment for you. If you can spend about $5,000 to $10 000, that’s a good start. You could buy a stainless-steel Rolex, wear it, and sell it profitably 10 or 20 years down the line.