Luxury watches as investments? A look at the best investment watches.

I love watches. And anyone who loves collecting watches, or any other luxury good, knows that it can be a very expensive hobby. Unfortunately, the overwhelming majority of luxury goods are depreciating assets. They are completely contrary to the idea of being frugal. They are not investments, and they are only good for flexing on social media.

In the past few decades, technological innovations such as quartz watches, the internet, and smartphones have made traditional mechanical watches obsolete as instruments of timekeeping. Ironically, however, even as mechanical watches have become increasingly irrelevant, their consumer appeal has increased. In many ways, luxury watches have become the ultimate status symbol.

For whatever reason, people are fascinated by mechanical watches, especially Swiss-made ones. For some, it’s an appreciation of horology itself. Others find it fascinating that they can purchase a product made by companies that have been in continuous operation for 100 or even 200 years. Vacheron Constantin, one of the “holy trinity” of Swiss watchmakers, has been in operation since 1755. That’s older than the United States! Yet others simply like the aesthetics. After all, most men don’t wear much jewelry, and watches are one way for men to express themselves.

And more than a few people collect luxury watches for investment value. I’ll quickly make a distinction between a collector and a flipper, because a watch flipper is basically running a business as a watch dealer, and is probably less interested in holding a watch for long term appreciation. I’ll be assuming a “buy and hold” approach for the rest of this article. Regardless, watches fall squarely in the category of “alternative investments”. Again, I feel compelled to state unequivocally that buying most luxury goods is an exceptionally poor use of money. A very small minority of luxury goods, however, do retain, and may even appreciate in value. This usually happens with very exclusive products which are limited editions, not available to the public, or otherwise limited in supply, and subsequently experience a surge in consumer demand. Watches are no exception, and some specific mechanical watches from a select few Swiss manufacturers have become incredibly sought-after and therefore incredibly expensive over time. Today, I’ll take a detour from the usual talks of stocks and bonds on this blog, and take a look at a few examples.

Rolex Submariner

Rolex GMT Master II

Originally launched in 1955 as a timekeeping instrument at the request of Pan AM Airways, the GMT Master is instantly recognizable by its distinctive dual-colored bezel and a fourth hour hand. The watch’s name derives from Greenwich Mean Time, and the fourth hand, along with the bezel, allowed Pan Am pilots to keep track of two time zones simultaneously. The world was just getting used to jet travel, which allowed people to go from continent to continent in a matter of hours, and Pan Am represented the pinnacle of this highly romanticized era. As a result, the GMT Master quickly became one of the most iconic Rolex watches of all time. Rolex collectors have affectionately given nicknames to GMT Masters with various bezel color combinations over the years, such as Pepsi (blue and red), Coke (black and red), and Batman (black and blue). Today, Rolex sells a stainless steel GMT Master II with an oyster bracelet for a mere $9,500 MSRP (the one shown has a jubilee bracelet), but since you can’t buy one from Rolex, secondary market prices are double that of MSRP at around $18,000 to $19,000.

Image: Rolex.com

Rolex Daytona

The Rolex Cosmograph Daytona is yet another iconic Rolex watch. This is an automatic mechanical chronograph, which means that it has the ability to act as a stopwatch, purely using mechanical means. Initially an unpopular watch, in recent years the Daytona has become one of Rolex’s most desirable pieces. A Rolex Daytona belonging to Hollywood and racing legend Paul Newman sold for 17.7 million dollars at auction in 2017, becoming one of the most expensive watches ever sold. Today, Rolex sells a 2021 stainless steel Daytona at MSRP of $13,150. As with the Submariner and GMT Master II, however, you’ll almost certainly not be able to purchase one at MSRP from any AD. Therefore, secondary market prices have skyrocketed to almost 3x MSRP. Interestingly, the white dial variation of the Daytona fetches a premium over the black dial variation, despite both having the same MSRP from Rolex. The white dial version currently costs around $38,000 on the secondary market.

Image: Rolex.com

Audemars Piguet Royal Oak, ref 15500

watch.png.transform.appdpmain.png — The Audemars Piguet Royal Oak has a distinctive design with its octagonal bezel and its 8 hexagonal decorative screws. AP offers the Royal Oak in hundreds of variations, including versions with incredible horological complications such as chronographs, perpetual calendars, and even tourbillions. It also offers the Royal Oak in different case sizes as well as precious metals. However, even a “standard” stainless steel Royal Oak with just a date display has become one of the most iconic and recognizable watches in the world. AP will sell its basic 41mm stainless steel Royal Oak for MSRP $22,900. That’s a lot of money, but of course, you can’t buy one, because being able to buy a Royal Oak at MSRP is a privilege that only a select few will ever experience. Currently, a blue dial Royal Oak ref 15500 costs anywhere between $55,000 to $60,000 on the secondary market.

Image: Audemarspiguet.com

Patek Philippe Nautilus, ref 5711

Many regard Patek Philippe as the pinnacle of Swiss watchmaking, and for good reason. Patek Philippe watches are worn by Kings and Queens, Presidents and Prime Ministers, sports stars and rock stars. Patek Philippe currently holds the world record for the most expensive watch ever sold at auction (a Grandmaster Chime, in 2019, for 31 million dollars), and eight of the ten most expensive watches ever sold at auction are Patek Philippe. The Patek Philippe Nautilus 5711 is a simple stainless steel watch with just a date complication. It carries an MSRP of $34,980 from Patek Philippe, but much like all other watches on this list, buying one at MSRP from an AD was all but impossible. I say *was,* because Patel Phillipe discontinued the blue dial version of this watch in 2021, making it officially impossible to buy from a Patek Phillipe AD (whereas previously, it was only mostly impossible). Aftermarket prices have exceeded 6-figures as of summer 2021.

Image: Google.com, original unknown

Keep in mind that MSRP prices listed above are current MSRP, as of 2021. Due to various factors including inflation, MSRP creeps up over time. Obviously, if you are one of the lucky few who can buy one of these watches at MSRP, you can immediately flip the watch for a huge profit on the secondary market. But since most people cannot buy these watches at MSRP, looking at the price history of the secondary market is more useful if we want to track the “performance” of these watches as investments. For the average person, the primary market for these watches might as well have zero liquidity and zero trading volume. The secondary market price reflects the price that these watches are actually bought and sold at at any given time. Obviously, the condition of the watch, and most importantly, whether it has “box and papers” (the manufacturer’s original presentation box and original warranty card) also determines the resale price for used watches, although many watches of this type being sold on the secondary market are in fact brand new and unworn.

How do these watches compare vs the S&P 500?

How do watches compare versus stocks, in this case, the S&P 500?

Whereas the S&P 500’s historical performance is widely available, there is no real definitive source for the historical secondary market values of a watch. For the sake of this comparison, we’ll use the price history feature of Chrono24.com. Chrono24 is a very popular watch trading platform, and their price feature shows the history of transactions on that platform. Keep in mind that Chrono24 is just one of many secondary watch markets (which includes brick & mortar stores, Ebay, craigslist, various watch collector forums and collector groups, etc.), so none of these prices should be seen as the definitive price of any particular watch at any given time. Also keep in mind that these particular reference numbers were launched at different times, so the price histories span different time periods:

For example, Chrono24’s price history for a Rolex Submariner Date 116610LN goes back all the way to September 2010, showing an average price for a new/unworn watch going for around $7,315 at the time. The exact same watch today (as of May 2021) is trading for $15,268. So, assuming that you bought this watch in September 2010 purely as an investment and didn’t wear it, over a period of close to 11 years, the price of the watch has more than doubled. This gives us an annualized appreciation of 7.08%. In comparison, however, the S&P 500, with dividends re-invested, returned 15.19% over the same time period (September 2010 to May 2021). A table with all the comparisons is shown below, showing all of the watches and their historical prices up until today (I used May 2021 as the cutoff):

Selected Luxury Watches vs. S&P 500
Secondary Market Price History (New/Unworn), Chrono24.com						S&P 500 Over Same Time Period
Watch	Time Period	Price Change Over Time Period	Total Time (Days)	Total Appreciation	Annualized Appreciation	S&P 500 Total Returns	S&P 500 Annualized	Winner
Rolex Submariner Date	Sept 2010 to May 2021	$7,315 to $15,268	3926	108.72%	7.08%	357.78%	15.19%	S&P
Rolex GMT Master II	August 2013 to May 2021	$8,768 to $18,302	2861	108.74%	9.84%	200.41%	15.07%	S&P
Rolex Daytona	August 2016 to May 2021	$19,232 to $38,692	1765	101.19%	15.55%	112.09%	16.82%	S&P
AP Royal Oak	May 2019 to May 2021	$36,372 to $57,318	762	57.59%	24.34%	58.33%	24.62%	S&P
Patek Nautilus	April 2013 to May 2021	$24,852 to $132,752	2983	434.17%	22.75%	209.51%	14.83%	Patek

Again, note that historical returns of the S&P 500 are readily available, but as far as price history of watches on the secondary market, I am quite constrained by the data available in Chrono24. Nonetheless, I tried my best to do an apples-to-apples comparison with the limitations in the available data.

There are, of course, many other watches which have gone up in value, so this is by no means an exhaustive list. Also, I only included contemporary models in this comparison, so the watches are going up against a decade of a remarkable bull run in stocks. The vintage watch market is a whole different ball game, and far beyond my cursory knowledge of watch valuations. Note, also, that the prices above reflect brand new/unworn watches. If the watch is actually worn, expect the resale value to decrease slightly. Finally, I do not account account for the costs of owning a watch as an investment (safekeeping, insurance, servicing), or the costs of investing in the S&P 500 (although S&P 500 index fund costs are negligible).

We see that out of our five watches, all performed reasonably well with significant appreciation in value. Not bad at all for luxury products, and certainly makes the cost of these watches more palatable! Purely as investments, however, only the now-discontinued Patek Philippe Nautilus 5711, blue dial version, has outperformed the S&P 500 over the time period that we have data for. Much of this came from a sudden spike in prices just in 2021, when Patek Phillippe announced its discontinuation. I should point out that the S&P 500 typically only returns about 9 to 10% annualized over extended time periods.

The risks of buying watches as investments also includes risk of theft, damage, and loss, in addition to market risk. On the other hand, investors in the S&P 500 only face market risk, and all reputable brokerages are insured by the SIPC.

Is the watch market in a bubble?

Impossible to say, although it certainly feels like it. But then again, many people believe stocks are in a bubble too. How high can the price of a stainless steel Nautilus really go? For example, I cannot envision anyone paying $250,000 for one, but I suppose a few years ago, a price of $125,000 seemed equally absurd.

What’s notable, however, is that these watches actually represent rather basic models from their respective manufacturers. It would be unfair to compare them to Honda Civics, but comparisons to a Mercedes C Class wouldn’t be a huge stretch: they are luxury products, sure, but are supposed to be the “entry-level” ones. They are not made from precious metals, do not have high complications, are not limited editions, and are not vintage pieces. The watch market is pretty bizarre.

Traditionally, the most expensive watches are ones which are made fully in precious metals (such as gold, white gold, rose gold, or platinum), and/or set with factory diamonds or precious stones, and/or containing complex horological complications. Stainless steel is not rare by any means, yet the stainless steel versions of the above watches are the most popular, with secondary market prices approaching that of the precious metal versions of the same watch in some cases. To me, the upper limit of how pricy a stainless steel watch can get on the secondary market is the cost of the precious metal version of the same watch (if it exists). At that point, the inflated cost of the stainless steel watch no longer makes sense.

Conclusion: buyer beware

Most watch collectors agree that you should buy a watch if you like it, rather than for its resale value. Don’t let this article fool you - most watches lose value. The market is highly volatile and unpredictable and watch models fall in and out of style inexplicably. Also, fake or replica versions of popular watches have become incredibly good, to the point where differences are no longer visible to the naked eye. There are watches that go beyond replicas, known as “superclones”, which use a mixture of genuine and replica parts, such as genuine hands and dials. It is incredibly easy to get scammed, both as a buyer and as a seller, when trading in the secondary market.

While there is an active secondary market for many watches, it remains an illiquid investment compared to conventional investments such as stocks or bonds. The turnaround time to buy or sell a particular watch can be measured in days or weeks, rather than seconds. Finally, watches have very little “intrinsic” or “fundamental” value beyond the cost of materials and cost of production, which is much lower than MSRP. I’ve already mentioned the risks associated with theft, damage, or loss, as well as the costs associated with maintenance and insurance. For all of these reasons, I don’t think watches make for good investments for the average person. For a watch enthusiast, however, who buys watches for enjoyment rather than investment, it can be incredibly cool if the watches you own happen to retain value, or even appreciate in value.

Finally, I would advise extreme caution when investing in any consumer goods rather than using them for their intended purpose. For example, some people may remember the Beanie Babie craze of the 1990’s, when certain stuffed beanie babies became hot commodities and were being flipped for 10x or even 100x of their retail value on the secondary market, such as eBay. People believed that the value of “retired” beanie babies would keep increasing, due to scarcity and demand. Like all bubbles, this one eventually burst as consumer demand waned over time. Swiss watches are certainly not comparable to mass-produced beanie babies in terms of history, quality, utility, artistry, provenance, or any number of other factors that watch collectors like to gush about. Nonetheless, no consumer or luxury good is immune to fads and bubbles.

I hope you enjoyed this slightly off-topic detour of the watch market. You may also be interested in my broader overview of alternative investments in general. Happy investing!