Is a Luxury Watch a Good Investment for Singaporeans?

For most Singaporeans, a watch makes a better accessory than an investment vehicle.

Watches are a favourite investment among Singaporeans, because they’re tangible. There’s no joy in wrapping a stock certificate around your wrist, right?

But think twice before you run out and purchase an expensive watch--it’s not as simple as just buying a Cartier and reselling it.

Why Do Singaporeans Invest in Watches?

Watches are a form of alternative investment, along with items like stamps, antiques, and vintage cars. Affluent Singaporeans often invest a portion of their wealth (around 5% of their portfolio) in these alternatives.

The advantage to an investment like watches is their low correlation to other financial markets, such as stocks and bonds. A stock market crash, for example, does not directly impact the value of your watches; they may hold their worth even if your mutual fund crashes.

There is also is the hope that high-end watches will have a resale value which exceeds their original price (capital gain.)

Beyond this, there are some people who find pleasure in just having good watches. A watch crafted by a master can work for centuries, and some are intended to be family heirlooms.

But do watch investments really work? Can you buy a watch, and then resell it for a lot more money?

Here are the four things that will help you determine when a watch is an investment or just an expensive accessory:

1. When It's an “Investment” Grade Watch” You Acquired Below the Retail Price

An “investment grade” watch is a high value, often limited edition watch. Most investment grade watches retail for sky-high prices, and sums like S$25,000 to over S$500,000 won’t surprise many serious collectors.

With figures that large, there often isn’t much room for the price to go any higher. The secret to successful watch investors is not in picking a watch that will suddenly grow in price; rather, they know that some of these watches can be acquired below the retail price.

When a limited edition watch is released (say a set of 20 watches), not everyone will buy them at the same price.

For example, say the retail price is S$35,000. The watch company may sell it to a celebrity at S$20,000, because they want their product on the wrist of someone famous. A regular customer may get the watch for S$30,000. Another customer, who is desperate to get one before they sell out, may “jump” the order queue by paying S$40,000 for the watch.

A serious watch investor has the means to obtain the underpriced watches. This may come from having contacts within the watch companies, or celebrity connections (this is why it’s a difficult asset to get into!)

Their capital gains come from reselling the watch. Because they got it for cheaper, they will make a profit even if they resell at the standard price. As such, it is the purchase price, more than issues such as make and brand, that investors pay more attention to. This can mean that some investors don’t even like the watches they buy - they just see an opportunity for profit.

2. When You Have a Channel for Resale

Let’s say you have a S$50,000 watch, and you want to sell it. The question is, how?

eBay or Carousell are obviously out of the question. Even if someone on these sites trusts you enough to send that much money (a nigh impossible occurrence), it would be risky to ship the watch to them and hope the cash comes through. Selling it through magazines or newspapers carry the same trust issues, and you may have to pay hundreds of dollars for repeated ad space, while still getting no response.

If you bring it to a pawn shop, you will receive less than the full value of the watch (perhaps 80% of the price). If you take it to a watch shop and put it on consignment, the store will demand a commission for selling the watch for you. The smaller the commission, the less inclined they are to push it on a customer.

Auction houses are the best bet for investment grade watches. These organisations already have a database of interested buyers. However, auction houses take a significant cut of the proceeds, sometimes more than 25% of the eventual sale price.

All these transaction costs make watches a difficult investment: not only must you sell above the buying price, you must sell at a high enough price to make a profit after all these costs.

For this reason, most watch investors spend several years building up a list of contacts (passionate watch collectors) whom they can sell to.

3. When It Was Previously Worn by a Celebrity

If a watch has been owned and worn by a celebrity, its value can increase significantly. One reason is that demand increases. It is no longer just watch collectors, but fans of the particular celebrity who may be interested in acquiring it.

Sometimes, even a watch model that is not inherently valuable can become a gold mine this way. For example, a Seiko SKX009 is seldom more than a S$200, but the one worn by Robert Redford in All is Lost is rumored to have auctioned for more than S$3,000.

Note, however, that this pertains to the specific watch worn by the celebrity.

Just because Anna Kournikova sports a Cartier la Dona watch, it doesn’t mean all Cartier watches of that make are more valuable. It is the specific watch on Ms. Kournikova’s wrist that grows in value.

If you are not a celebrity and you wear the watch often, the reverse will happen. The value of the watch could drop.

Many watch investors never put on the watches they buy, instead keeping them safe until resale. This is another area in which collectors and investors often differ. Most collectors want to wear their watches, at least to events.

4. When Its Original Parts are Intact

Serious collectors (and other investors) will not just examine the external condition of the watch. They make take it for a formal appraisal, during which even the internal components may be checked.

There is a thriving grey market for investment grade watches. Watches in the grey market are not counterfeit. Rather, they are authentic watches that pass through unauthorised sources. A common problem for watches that have changed hands in the grey market is stolen internal parts. For example, an authentic Rolex may have had its gears stripped out and replaced with cheap generic counterparts, and then put back together.

This is almost impossible for a non-expert to spot, at least until the watch starts to break down or an appraiser inspects it. This is another reason why it’s so hard to sell an investment grade watch. Many buyers are wary of these tricks.

The process of buying and selling watches, as an investor, is thus more complicated than simply knowing which brands are good. Watch investors need a wide database of contacts, and must operate along harsh lines of profit and loss. Passion and appreciation for watches is more the realm of collectors than investors, even if some investors may love what they do.

Being a Watch Investor Versus Being a Watch Collector

Finally, it’s worth noting that watch collectors are not the same as watch investors.

Strict watch investors may not even like the watches they buy. They acquire a watch because the price is good, and they see a potential for profit. A watch collector just wants to have the watch. For that reason, collectors may even buy at an inflated price.

In addition, collectors are seldom willing to sell their watches. An investor has to be ready to sell when the price is right; otherwise, they will never make any money!

So if you intend to invest in a watch, do so because the price is good, and you are willing to sell it when the time comes. But if you really like the watch and want to keep it, don’t kid yourself about it being an investment.

Treat it as a luxury and an expense, and make sure you are in a position to afford it. Do not lie to yourself and permit yourself to overspend because “it’s an investment.” Considering it’s a hefty price, be sure to maximise every possible discount and rebate.

You can start by using a cashback credit card like the American Express True Cashback Card, which gives 1.5% cashback on all purchases. Unlike most credit cards, which caps your rebates at S$60-S$80 per month, the True Cashback Card has no cashback limit.

If you use this card to buy a Rolex Oyster Perpetual for S$13,200, you get S$198 cashback - assuming, that is, you can pay the full S$13,200 by the due date. Remember, you don't get any credit card rewards if you have rollover debt.

So do watch investments work? They certainly can, as you can see with Singapore’s successful Watch Fund. But being a watch investor is as good as having a full-time job, and it takes years to learn the trade. It is not an easy form

For most of us, watches will always be part of a treasured collection rather than an investment vehicle.

Pro-tip: you can use a personal loan for investments if the resale value of the watch will be greater than the interest you pay on the loan.

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