Thinking of buying a luxury product? Consider a vintage Rolex watch or an Hermès Birkin bag (if you can get your hands on one!). You might actually turn it into a lucrative investment.
The first thing you need to know is the difference between an investment and a really expensive purchase. You can't say, "Oh, I've invested in a really expensive pair of shoes."
It isn't an investment if you don't plan on reselling it nor realising any return on investment (ROI) on the item.
For example, an art collector may have a collection that he believes is worth millions because he paid millions for it.
But if he does not sell it, or if it is not valued by industry experts, the art is merely an expensive collection rather than an investment.
So, when people say, hey "I've just invested in a Rolex", they might actually mean it if they have chosen the right one.
When it comes to investing in alternative investment products like handbags and watches, it is known that not EVERY handbag or watch brand/model will see an ROI.
In the handbag world, the most obvious investment is the Hermès Birkin, while for watches, Rolex is the go-to brand.
Apart from its price point, as well as branding and marketing efforts over the last few decades, its value is also tied to the most basic law of supply and demand.
In Hermès case, its Birkin bags are not attainable by just anyone.
In a media interview with The Huffington Post, Max Brownawell, Heritage Auctions' senior specialist of luxury accessories, it was revealed that even if one has a lot of money, they can't simply walk into Hermès to purchase a Birkin.
They would need to have a long-standing relationship with the sales associate and even then, chances of acquiring one is very low.
Even when a buyer has gained access to this privilege, each buyer is only entitled to purchase a maximum of two Birkin bags in a year.
Hermès had successfully created a product with enough demand but little supply.
AND on top of all of that, when given the chance to purchase a Birkin, buyers can't choose the colour or size. A random Birkin bag is offered to the buyers, take it or leave it.
This creates even more demand for Birkin bags of a certain colour and size.
These Birkin enthusiasts can either look within their network to trade or turn to auction houses like Heritage Auctions.
In the last 35 years, Birkin bags have increased in value by more than 500 percent, according to a study by online retail platform BagHunter.com.
The average increase in value was 14.2 percent annually, showing better returns compared to both gold and the S&P 500.
A fuchsia crocodile-and-diamond Birkin handbag was sold at a world auction record of US$221,846 in Hong Kong.
Watches are part of a fickle and emotional market, prominent horology website founder Ariel Adams says in an interview with Time. Prices can be influenced by a single collector, pop culture and a myriad of other reasons.
But there is no guarantee that its value will increase.
Rolex watches are also a lot easier to attain. However, certain Rolex collections are released in limited quantities, paving way for demand.
Collections like the GMT, the Submariner, and the Daytona have performed well in terms of appreciation over the years. Most of these watches will at least retain their value, or see a slight appreciation.
In order for the value to go up, one of the most common criteria is whether or not it is vintage. Vintage watches, which are collections released 20 to 30 years ago are more valuable than new ones.
That means, if you buy a new limited edition Rolex today, you might be waiting 20 to 30 years before your investment is realised.
In sum, "investing" in a Birkin bag will most likely allow you to see your ROI sooner than with a Rolex and would have a better resale value.
But as with all types of alternative investments, what is important is if you are passionate about the item and enjoy having the item in your possession.
At least, that way, if the ROI is not realised, you still own a luxury item that you can be happy with for years to come.
Do you think you will be buying either a Rolex or a Birkin after reading this article? Let us know in the comments!
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