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Luxury goods: are they a safe investment?

There are many ways to invest money, and buying luxury goods is one of them. In this article, we will look at some of the benefits and risks that come with investing in high-end watches, handbags, diamonds and other luxury items.

Common types of luxury goods

When we talk about luxury goods, we usually mean products that increase in value over time. Certains goods, like vintage cars, old watches, and even handbags, are considered luxury items because they are rare, out-of-production, and generally of the highest quality. Many of these categories are very attractive to collectors and people who like to own high-end items.

In the last few decades, the luxury market has seen significant year-on-year growth. According to the management consultant company Bain & Company, the luxury market grew 5% in 2018, to €1.2 trillion globally. So where do luxury goods investors put their money?

  • Vintage cars: Cars tend to lose value as they get older. However, some vintage cars go against this trend and become more valuable over time. Investing in vintage cars can be very lucrative, as long as the investor has the required knowledge. Classic cars from the likes of Porsche, Ferrari and Alfa Romeo can go for hundreds of thousands or even millions of dollars.

  • Artwork: Art has become a popular investment type over the last decade. These are long-term investments for people who are willing to potentially wait years to see a return. Investing in art requires you to do a lot of research on the piece and the artist - is the art featured in museums or collections, and has the artist gained a lot of recognition for their art?

  • Watches: Investing in watches can be a very rewarding experience. In 2017, Paul Newman′s Rolex Daytona was auctioned off for a staggering $17.8 million, and these types of events have brought many investors to the luxury watch market. Many experienced investors are now looking to find Rolexes and Audemars Piguet watches to invest in.

  • Wines and spirits: Buying and storing wine might sound like a sophisticated hobby, but investing in wine can be a great asset in your portfolio. Rare vintage wines can be worth tens of thousands of dollars, and the right investment can give high returns. As with all other luxury goods investments, wines require a lot of research and knowledge about the industry.

Benefits and risks of investing in luxury items

As with any investment, there are both benefits and risks associated with investing in luxury goods. The main benefit is that a smart purchase of a vintage item can yield high returns. If you are an expert in cars, jewellery, watches, art or any other type of luxury goods, you might be knowledgeable enough to start investing in it. The market can turn quickly, so it is important to stay on top of the latest developments at all times. And remember - as with any asset, if you want to sell, you need to find a buyer.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes

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