Watches
Watches Returns vs S&P
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Versus S&P
•
a year ago
0.00%
Versus S&P
•
a year ago
6m High
6m Low
Luxury Watches
5,362.85
5,362.85
S&P 500
4,588.96
3,855.76
Luxury Watches
S&P 500
Does not follow the stock market
Sources: Timepeaks Luxury Index, SPX
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Highlights
Good For
Hedge inflation
Time Horizon
5-10 years
Diversification
Environmentally Friendly
Regular watches are simply a timekeeping device or fashion accessory. Investment watches, on the other hand, are luxury goods that retain or increase in value over time. Historically, high-end watches have only acted as a status symbol. But ever since the record-breaking $17.8 million sale of the Paul Newman Daytona in 2016, luxury watches have become a bona-fide alternative asset class. This, however, does not mean that all luxury watches make for good investments. So far, only limited edition pieces from the Holy Trinity (Rolex, Patek Philipe and Audemars Piguet) have consistently been shown to appreciate in value.
Did you Know
According to the Guinness World Records, the first wristwatch in history was made in 1868 by Patek Philippe for Countess Koscowicz of Hungary.
While the Omega Speedmaster Moonwatch Professional is the first watch to go to the moon, the Sturmanskie "Gagarin" Watch (as worn by Yuri Gagarin) is the first watch to enter space.
At a staggering $24 million, the Patek Phillipe Henry Graves Supercomplication is the most expensive watch ever auctioned.
Considerations
According to McKinsey, the secondary luxury watch market was worth $18 billion in 2019 and is poised to grow to $32 billion by 2025.
Unlike many other collectibles, watches can be worn and enjoyed for years all the while they appreciate in value.
Nowadays, coveted watches tend to have waiting lists of up to 3 years (sometimes even longer). This high demand and low supply continue to push prices up on the secondary market.
Reasons to Invest
Given the increase in speculative investing, some experts believe that the watch market is in a price bubble that could soon burst.
Investment watches that are worn often will require frequent servicing and could end up depreciating over time due to physical damage.
Wearing high-end luxury watches in public could invite unwanted attention from thieves.
Drawbacks
How You’re Taxed
Capital Gains
If an individual intends to buy watches with the sole expectation to sell them for a profit, they should consider establishing a separate LLC for this. According to the IRS, “net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate”. With that said, establishing a business entity comes with a few key benefits, like being able to deduct expenses and losses. Registered watch investors can also take advantage of like-kind exchanges, which allows them to defer taxes if they invest the proceeds in a similar investment. There are, however, strict requirements around like-kind exchanges, so please consult with a tax professional beforehand.