PLATFORM

When Time is Money

by Willy Yeo
15 May 2017

There are those who collect watches for their intricate mechanism and precise engineering; those who do so because they expect a price appreciation; and those who are motivated by both.

Investing in watches can be a hit or a miss so that, as some watch enthusiasts say, invest in a timepiece not solely for the likelihood of appreciating value, but for the piece genuinely intriguing you.

Whether a timepiece costs $100 or $1,000,000, many of them plummet in value the moment they leave the store, if they are bought first hand. This is why it is important, if one is buying partly for investment, that one should buy vintage, or an incredibly rare piece, at a special price.

Vintage watches of a good and exclusive brand normally see resale values skyrocketing in auctions, especially if they are also rare. Averaged out over the years of ownership, some investments have fetched double-digit annual profits, sometimes even more, especially if they are made of precious materials, and include highly sophisticated mechanisms.

Brands that are known to meet these requirements include Patek Philippe, Vacheron Constantin, Audemars Piguet, Breguet, A. Lange & Söhne, and independent newcomers such as F.P. Journe, Richard Mille, and Greubel Forsey. One major record-setter at a Christie’s auction a few years back, a 1942 model in 18 karat gold, featuring a perpetual calendar, was sold for $2.8 million, almost twice its already high presale estimate.

When matched against the wider economic climate, with record low interest rates from banks and great market volatility, investors with dollars to spare prefer to park some of their cash in a watch. This would be both seen as a wealth conservation mechanism and an accessory.

"What is important in selecting the winning watch, besides brand, rarity, engineering, design, and materials, is an understanding of what one’s investment objectives are."

Investing in watches does not have to be the reserve of the rich. There are investment possibilities in more affordable pieces, including some Patek Philippe creations in the 1940s and 1950s. Typically costing less than $50,000, some of these watches have great attention to detail and iconic designs.

What is important in selecting the winning watch, besides brand, rarity, engineering, design, and materials, is an understanding of what one’s investment objectives are. Being clear about it is critical in forcing one to assess proceeding with the purchase, and if one decides to sell it off later because his objectives are no longer met, or if they have in fact changed.

As the holding period of a timepiece is often several years or even decades, one’s capital is exposed to possible losses that are difficult to foresee, as well as opportunity costs of being deployed elsewhere. It is also important to remember that timepieces do not generate income and are far less liquid than stocks or property. In the absence of a genuine love for the piece, a justification for making an investment is difficult.

Watches as investment are similar to artwork, vintage cars, and rare wines. They are objects of passion and are difficult to value over the long periods of time. One is typically expected to hold them before a meaningful return can be made, bearing in mind that the most valuable ones have to be serviced regularly, by the original manufacturer, if they are to retain their value. These are the operating expenses that must be taken into account for an overall assessment of one’s return on equity.

Alongside risks of potentially buying a counterfeit – especially if one is buying vintage and not from a trusted dealer – it is crucial that one is aware of all the pitfalls that may arise before actually taking that plunge.