Invest in Watches: The Art of Watch Collecting

PREFACE

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few months before I started writing this book, a friend of mine reached out for some advice on buying a Rolex Submariner. He knew I had been collecting watches for over fifteen years, but above all he wanted the exact same watch I purchased back in 2010 - a Rolex Submariner 14060M.

In 2010, I was an engineering student and had saved up for quite a while before being able to acquire such an exclusive watch. To this day, I recall the exact details of how much I paid for my Submariner - it was by far the biggest purchase I ever made at the time. It was retailing for $4,800 and I found a way to purchase it new for less than its retail price at just $3,800! Fast forward a few years and here I am, finding a good deal for my friend with the exact same reference with box and papers for $8,200. It is worth noting that at this price he was able to purchase a used model only; meaning if I would have been okay with parting with my watch, I could have sold it to him, netting me a sweet $4,400 profit… essentially getting paid for wearing this watch icon for a full decade. Currently, that same watch in brand new condition trades for over $15,000.

From an investment perspective, this translates to a 13.3% compound annual growth rate. But before we dive into the financial aspects, allow me to clarify: I am not a financial advisor, and I have no plans of becoming one any time soon. The contents of this book do not constitute financial advice. Matter of fact, I expect you to always do your own research. You may, of course, use this information - but only at your own risk while keeping in mind that I do not accept any liability for what you do with my advice given in this book. And if you wish to find out more about the topics covered here, I suggest you consult an independent financial advisor. Now that the legal disclaimer is taken care of, let’s look at some of the data on investing in watches!

Let me start with a question: Do you know any other kind of investments that you can actually own and play with that are performing better? This is precisely what initially attracted me to watches. Watches can be expensive. Very expensive. As a college student, just like most people in the world, the immense amounts of cold hard cash needed to purchase a timepiece like the Rolex Submariner 14060M made the acquisition immensely complicated to justify.

But I soon came to a realization. If I could somehow manage to make wise purchasing decisions, I could get a watch that, if resold, would not only retain my original investment amount but could very well earn me a little profit, eventually allowing me to jump to an even higher grade of wristwatch. In a way, this kind of reasoning allowed me to remove the financial consideration when looking to buy a watch. I simply couldn’t afford losing this kind of money. And so, I had no option but to make smart purchases from the start. There is something quite reassuring in knowing that, no matter what, you can always sell a watch to get back on your feet and the crazy amount you spent (i.e., invested) is not gone. In a way, this was my interpretation of Oscar Wilde’s infamous quote that, Anyone who lives within their means suffers from a lack of imagination.

I personally believe that cleverly combining industry education, an eye for fine watchmaking and street smarts are the best approach to watch investments. Actually, if I am being totally honest, I dislike the term investment. People looking to get their hands on pieces that are currently in high demand to flip them for a profit are making it harder for true watch lovers to own their dream pieces by either filling up manufacturer’s waiting lists or increasing prices on the second hand market far above their true retail price. This bothers me a lot. I do however like the idea of a wise watch acquisition that will allow a collector to dive deeper into their passion of mechanical watches. Again, if you are looking to make a quick buck, please do me the favor and give this book to a true watch enthusiast. You should even ask for a refund from Amazon or whoever sold you this book!

Of course, I will never complain that my watches retain or even increase their value, but I wouldn’t want my passion to solely become a financial investment of mine. Actually, I could even complain a little that watches see their value increase crazily. For instance, some watches in my collection have grown to such high values recently that wearing them as an everyday watch (which is why I purchased them in the first place) now has made me very aware of the risks of even a scratch, which would destroy thousands of dollars in value. And I won’t even mention all the infuriating robberies making headlines in the media. Some of my favorite watches should rather be staying locked up in a safe. This is not the kind of thoughts I want to have when I am picking a watch in the morning to wear for that day. And I am not alone with my thoughts: Many collectors are slowly being turned away from their favorite hobby by these considerations. That being said, if I am able to help even a single genuine watch enthusiast to make a better purchase, then this book will have been worth writing.

In the past years, I have witnessed a change in the narrative of the mainstream media when it comes to luxury watches. Whenever an article about a new watch pops up, mentions of money, value, and investment aren’t far away. But what about design? Heritage? Craftsmanship? The intricate technical details of a timepiece? The emotion of acquiring, owning, and wearing a watch? Well, forget about those! Because now it’s all about the money! Aside from the everlasting fascination most of us have for money, there are also several other factors that have pushed this financial narrative to the forefront of luxury watches. Recently, we have seen a number of news stories on watches with money as their main focus. Just a few weeks from when I started writing the first draft of this book, a unique piece by Patek Philippe sold during the Only Watch Auction in Geneva for $31 million Swiss Francs, making it the most expensive watch in the world and shattering the 2017 record of Paul Newman’s Rolex Daytona for over $17 million.

Note: Throughout this book, when referring to auctions, I will use the original currency of the sale. This shouldn’t be too confusing as Swiss Francs and US Dollars (and now even Euros) exchange rates are quite similar.

Even some mass-produced steel watches from established watchmakers are in short supply as growing demand clears out inventory around the globe, resulting in waiting lists of several years and second hand prices of two to three times above retail. This isn’t just happening to watches. The media coverage of the Bitcoin craze or NFTs also shows how we are always on the lookout for the next big thing. As humans, we can’t help but search for the next best (crazy) investment that will allow us to multiply our money indefinitely, with minimal effort and ideally overnight of course.

Granted, click baiting isn’t something new. Neither is the wrong advice shared by so-called experts all over the Internet. Just type «invest in watches» into Google or YouTube and look at the results! Aside from the Rolex, Patek Philippe, and Audemars Piguet pieces that are currently on waiting lists, the rest of the «advice» is on watches that you can find new at 30% to even 40% off their retail price. This is quite literally the exact opposite definition of an investment.

Imagine how disappointed a new aspiring collector would be if, by following one of those experts, they purchased a watch, thinking they made a great decision, only to find out that they could have bought this watch for far less and that their investment keeps degrading in value. Now, it’s not all about the money; but this lasting impression of being fooled may very well ruin someone’s passion for watchmaking.

99% of the time when people talk about investment in watches and value retention, they have a vetted interest and are usually selling pre-owned watches. This infuriates me. That being said, we can’t pretend that money isn’t important or that if you had to choose between two watches you equally love, the higher value retention one wouldn’t be a better choice.

Thierry Stern, CEO of Patek Philippe, isn’t afraid of using the term investment when referring to his watches. This word shouldn’t be some sort of scary word banned from any and all serious discussions on watches. As a community, we need to address all aspects of this hobby - otherwise we are fooling ourselves. This can sometimes be an explosive topic, highly debated among collectors with a hint of subjectivity, and I am here to voice my thoughts on it. Please don’t take it too seriously, we’re just talking watches!

I also wanted to demystify the relationship between watches and money. I truly believe that you can find watches with serious horological content at any given price point which can also be good purchases from a financial perspective. If you can buy a watch that ticks all the boxes - including value retention - then that’s the best you could experience as a watch enthusiast.

Watch investing or money within watches often is a sensitive topic within the watch enthusiast community, and I understand that. It always makes me a bit uneasy when someone reaches out to me about watches and their first and only question relates to money. It is one of the main reasons behind me writing this book. There is a lot of controversy around this topic, which is why I will also go beyond just answering the «Is X watch going to go up in value?» question.

In my fifteen years of collecting watches, I have had the pleasure to accompany many enthusiasts in the creation of their watch portfolio. I have also worked in the watchmaking industry for most of my professional career. I can safely say that there isn’t a single day that goes by without me being surrounded by amazing pieces. But the most satisfying part of being immersed in this community is that I get to engage with other watch collectors. This has even taken a larger part in my watch collecting journey since I co-founded the app Toolwatch.io, which is now used by over 180,000 watch collectors to measure and track the accuracy of their watches. I am also regularly answering questions about watches on Quora (find me at quora.com/Marc-Montagne), where my insights have been viewed by over 15 million curious watch enthusiasts. This incredible response made me come to the realization that a lot of people had questions on how to invest in watches while retaining or maximizing their newly acquired asset’s value! Thus, I hope this book will become a good resource for my watch collecting friends and followers. My goal with this published work is not to give you a list of watches that you should buy now (though I will!) but rather to help you understand what to look for so that you can better evaluate potential watch acquisitions.

The only downside of writing a book is that it doesn’t allow the same level of interaction as digital options like Toolwatch, Quora, and Repetition Minute, the French podcast on watches that I started hosting in 2019. So please reach out to me on social media with any questions or comments you may have - either on Instagram (instagram.com/initialsmm) or Twitter (twitter.com/MarcAime), where I would be more than happy to continue the conversation.

CHAPTER 1

START INVESTING IN WATCHES

«Nowadays, people know the price of everything and the value of nothing.»

- Oscar Wilde

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ost people would consider a luxury watch not an investment but an expensive toy for adults. And yet, you have probably picked this book up because in the back of your mind you already know that there are some watches that make up the exception to that rule. And these select few pieces are not always what you might expect! When we hear about collecting and investing into watches, most of us think of Rolex and Patek Philippe - mainly because these two brands have started to appear more frequently in mainstream media. You may even remember some auction records that were fetched by watches of those two brands.

As a consequence, most beginning collectors will assume two things: First, that only Rolex and Patek Philippe are good investments. And second, that all watches from Rolex and Patek Philippe will earn them a hefty premium. Both claims couldn’t be more wrong! While there are definitely some immensely collectible and valuable watches from these two brands, it is dangerous to generalize all past and present production of these (and all other) brands in the watch industry. Once we take a closer look, it becomes obvious that only a fraction of all the watches they have produced will fetch a premium on the market. On top of that, those watches are exceedingly rare, which is why you will have to face competition when acquiring them, making this hobby even more complicated.

As a collector, you need to have a thorough understanding of the industry dynamics and brand developments while also staying aware of the opportunities that become available on the market. Rolex and Patek Philippe’s success at auctions didn’t happen overnight, and very few people could have predicted those results just a few decades ago. You do not want to miss the next big trend in the market.

My goal is not to teach you how to make money while buying and selling timepieces. What I would rather prefer is to help you develop an appreciation for fine watchmaking; and if I can do so while also helping you make smarter decisions from a financial perspective, then that’s perfect. However, let’s not forget that the best watch for you is not necessarily the one that gets you the best financial return while sitting in a safe but rather the one that gives you the most joy while being worn on your wrist. Buy something that you enjoy and want to wear, and above all buy something that you understand. That is what this book is all about.

Of course, some watches can bring a great return on investment, not just in terms of emotion and enjoyment but in pure financial terms. According to Knight Frank’s wealth report for 2020, luxury collectibles including watches (as well as vintage cars, art, handbags, and wine) have often outperformed the stock market. There is nothing wrong with that, and there are indeed a couple of reasons why watches especially can be great investment vehicles. So let’s have a look and see what can impact the value of a piece. I’ll also point out some similarities to paintings, where we can find similar dynamics.

Size: Unlike a painting, watches are small and can be stored in a pocket. Not to mention the fact that you can wear them on the wrist! Even the smallest kind of safes that you would traditionally find in a hotel room can easily store a dozen watches. While larger format paintings from the same artist would normally get higher prices on average than a smaller format, this is not the case with watches. Therefore, transporting and carrying watches is very easy and convenient; most collectible watches are only between 30 and 42mm in size.

Liquidity: Watches that are highly sought after are extremely liquid. There are multiple modern references that are so desired that, if bought at retail price, you could resell just right after leaving the shop for a hefty premium. In cash. And I am talking about watches worth tens of thousands of dollars, if not more. It isn’t rare for collectors to receive Instagram DMs asking if they are willing to sell right after posting a new watch. This just doesn’t happen with paintings or cars.

Accessibility: There are references of watches that represent good investment potential at literally all price points. The book you are holding in your hands will demonstrate that! Paintings are less accessible and the cost of entry is usually higher than most watches we will be discussing here.

Pleasure: Of course, you can (and should!) enjoy a nice painting on your wall. However, you will not have the same connection as with an item you will actually wind each morning, wear throughout the day and look at several times per day. If you are reading this book, you are probably already addicted to watches and have found yourself looking at your watch without even being able to tell what time it was - simply because you were captivated by the beauty of the piece. Returning to the Submariner example, the watch gained value even though it was being worn and its condition altered. Of course, it would have gained more value if it was kept unworn, but the pleasure would have been completely removed! On some occasions though, wear can even impact the value of a piece positively. The dial, hands, and case can age in a tasteful way, earning what is called patina.

Unlike stocks, watches are a highly tangible asset that you can physically enjoy. When your stock portfolio drops, you are left with less than before, but when the value of your watch drops, it still keeps telling you the time and doesn’t lose its beauty overnight. You are therefore better off with watches that you actually enjoy wearing for the sake of it.

Hype: Because of record auction prices and crazy resale values, watch collecting has caught a lot of attention from the media recently. Some collectors are concerned by this and talk about what they call the bubble of watch collecting. I don’t believe this is the case though as there is an intrinsic value to pieces that is hard to deny. Of course, certain pieces might be overhyped and their value will drop, but great quality pieces will retain their value no matter what.

So, buy and wear your favorite watch - and if you ever have to sell it, you will get to make off with a decent amount of money. However, if you buy a watch only with money in mind and then leave in your safe and its value goes down for any reason, you end up a fool. Don’t be that person.

Quality: Like any masterpiece by a talented painter, a watch that is well made by a renowned watchmaker and has a high level of finishing will always