We live in a world that bombards with us with all sorts of marketing messages. We receive them across both online and offline media and also receive them via rebroadcast from friends and social platforms. When it comes to luxury goods, many corporations try to convince us that what they sell is not only something that will fulfill a consumption need we have, but that it can also maintain or even appreciate in value. So a consumable now becomes a financial investment. All the more reason to buy it!
So are the corporations right? Strictly speaking, an investment is any asset that we buy in the hope that it will either appreciate in value in future and/or generate a reliable income into the future. So what are the issues when deciding if something is an investment?
All the resources you'll ever need as an investor
We've gone ahead and done the work. Compiled here are all the resources you'll need as an investor.
Only the rarest hold value
Patek Philippe, Audemars Piguet, A. Lange & Söhne. Do these names ring a bell? These and a few more are the only ones that are considered watch collectibles and hence possible investments. And you usually need to own the rare complications or vintage models which routinely exceed US$100K in value min in order to realize any appreciation in value.
So if anyone tells you that a Rolex or worse a Tag Heur is an investment, please ignore them. The former may hold some value, but it does not usually appreciate in value.
The same holds true for Jewellery. Whether it is Cartier or Van Cleef & Arpels, the need it fulfills besides its intrinsic beauty is social signaling. Few of these pieces will appreciate in value over time like an investment asset.
Very illiquid & opaque market
Even if the asset can increase in value, you will also need a market to sell it in. In this respect, there are wine, art, watch and jewellery brokers in most major cities. However, the market is extremely opaque and there are no listed prices with ready buyers and sellers on both sides. So unless you are an expert in the field, it is highly likely you will not be able to extract the best price for your item.
Asset can wear and tear
Watches, wine, bags all need to be stored with care. If you are wearing them, you also need to be aware that any wear and tear will result in a fall in value. This is especially true for bags and watches which can show scratches and damage quite easily.
In summary, my advice is to treat all luxury items as consumables. Enjoy it as a consumable not even a depreciable asset. Unless you are willing to spend the time and effort to become an expert in the field, and if you are willing to spend significant resources to buy the rarest items, it is better to stick the traditional investments like property, stocks, bonds, gold etc.
About the Author
Lim Dershing is the Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. Dershing is also an active angel investor in other digital media startups. His goal is to help via experience sharing, these businesses to grow to their full potential. His experience covers all the topics required to startup, build and scale an internet business in South East Asia.
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