Buying A Rolex IS NOT an Investment

over the last few years some luxury watches have outperformed both the stock market and real estate are luxury watches a better investment than the stock market time to think like an investor [Music] welcome back to the channel if you're new here my name is josh i run a wealth management firm and i'm obsessed with these ideas of like financial independence investing and just living life on your own terms if you guys are into that sort of thing too make sure to smash that red little subscribe button down below so we can grow like crazy just like these red rolex pepsis these gmts they're going crazy it's insane and for most people out there there's really two perspectives that you can really have on the whole luxury watch segment there's the man that's an insane waste of money who on earth is spending that much money on watches and then there's the other segment which is kind of like the collectors the people who see these as timeless pieces of art things they like to collect and maybe even things that could go up in value over time and you know i empathize with both points of view for instance quick story one time i was at an investment conference in new york it's fantastic conference i loved it and i was sitting in the crowd as one speaker went up his name was scott galloway and if you haven't heard of scott galloway i highly encourage you to go look into his stuff he's a brilliant brilliant guy and he gets up on stage and he says all right who in here has a luxury watch that they would consider a luxury watch and you know at that conference like half of the people put up their hand and then he says okay who of you think that the purpose of your watch is to tell the time right and everyone goes yeah of course like that's the reason you buy a watch is to tell the time and he goes wrong what you have on your wrist is a ten thousand fifteen thousand dollar piece of metal that signals to other mates propagate with me because i have abundance and the whole crowd kind of breaks out laughing and i was like oh man yeah i kind of raised my hand for both of those things and you know there's some truth to that a lot of about these watches or jewelry or any of these things is they are to some degree just purely a status symbol you're trying to signal that you you know you've done well and i i i think that is certainly partially true but there is another side to this and you know 90 of you or 95 percent of you will think i am crazy for saying this but five percent of you 10 of you will really get it watch collectors understand that a watch kind of has a soul and that sounds crazy but it really does you you build a relationship with the watch over time you know you have to wind it you have to keep it clean you have to you know it's on your wrist all day and you use it to tell time and um there is certainly some aspect of it that you almost build a relationship with your collection which is i know super weird something i never thought i would say but it's crazy and i mean some of the coolest things about these watches for instance is that you know they're automatic hundreds or 50 whatever how many years ago people figured out how to make a watch perpetually tell the time without needing to put a battery in and they're making these things by hand rolex takes a year to make by hand it's not made by a machine and back in the day when people were diving underwater to try to find hidden treasure whatever it might be these people trusted their rolex to tell them how much time they had before they had to you know before they were going to run out of air pilots use you know the gmt to determine time zones and different things like that before we had the technology to do it so there really is history there really is heritage to these things but at the same time yeah for sure they are some element of them are just status because you know every single celebrity wears them and all the you know tiger woods wears a rolex that's really the brand value behind these things but today i want to talk about the investment value of watches because i posted one video on my channel you can go watch it it talks about how i need to sell my rolex because i'm realizing that it's actually an investment problem for me the value is rising enough that it's kind of creating this imbalance in my portfolio and from that video a ton of you guys kind of work actually that video got the most comments i think i've ever had on a video and a lot of people came into my direct messages on social media or contacting me saying hey i want to learn more about this whole watch thing so it's interesting it isn't a traditional investment but a lot of people are starting to think about it that way and that's where i want to start first things first a rolex a watch a luxury you know piece of jewelry is not an investment by traditional investment terms for something to be an investment it has to produce cash flow you know a farm every single year it's going to produce cash flow because you till the fields and you have livestock and you can make money from those things and the livestock propagates if you have a business you have people in that business running the business providing value you know driving sales um if you have even something like a rental property you have a piece of property that's generating rent right these things are income producing a bar of gold a rolex these things don't produce income if i buy a rolex this year in 30 years i only have one rolex it hasn't produced more value so in my view a rolex is not an investment it's a speculative asset but i want to talk a little bit more about the price gains that we've seen in these speculative assets and maybe even if it compares to the stock market so one of the really weird quirky things about me that like my parents used to come downstairs into my basement i was like like not even a toddler but like a child and i was always watching antiques roadshow which is hilarious because a lot of people find that to be super boring but on a certain episode of antiques roadshow i found there was a gentleman who bought a rolex gmt in the 60s for this watch this watch i paid the 120 dollars the other watch which had some gold to the bracelet i bought for my dad and i paid 104 for that so this guy goes and buys a watch that he doesn't really even know what it is and he spends a hundred and twenty dollars on it and to him he said you know that was a little over one month salary in the military back in 1960 which is crazy to think about how much wage inflation there's been but i want to dive into what is that watch worth today and how much is the average military salary today to kind of compare the returns of let's say inflation and maybe even the stock market to what his watch was worth take a look at how crazy this watch is valued today it's a very very collectible watch just the watch on its own merit would be worth today between 35 and 45 thousand dollars but this watch is worth much more because you save the box and all the paperwork for it easily today it's 65 to 75 000 in the market so 120 dollars to now 70 000 that's insane like that is 583 times what he paid for the watch and if you think about i even went and looked at the numbers what is the average military salary today and it came out about 3 500 in america and what that means is military salaries multiplied by about 37 times over that time period whereas the value of this watch multiplied 583 times and what that means is that the watch increased in value 16 times the wage inflation which is crazy so now what i want to talk about is what is that as a compounded return if you're thinking about like investing you think in terms of compounder returns well over this time period the s p 500 the overall stock market compounded at about 10.1 per year this watch going from 120 bucks to 70 000 compounded at 11.1 a year so that's crazy because over even a 60-year span that's a lot of data that's a lot of sample size this watch effectively beat the stock market now the tricky thing is you're you kind of have to determine which watches will do well and which ones don't because there are many different types of rolexes or other watches that are actually going to depreciate in value and won't even grow so it's about picking the right one and that brings me to kind of my story i walked into a jewelry store and i got just super lucky and i talked to the right guy and we were hitting it off and we had a fantastic time just chatting about watches and i was kind of asking him like which of these watches do you think are going to go up in value i'm thinking of rewarding myself i'm this status hungry kid trying to impress my friends i've made a big lump sum of cash young in my 20s and i'd like to buy a luxury watch and he says oh okay well any of the watches that are going to go up in value you can't get right away you're gonna have to get on a waitlist for but this green rolex hulk submariner if you can get your hands on one that's gonna go up in value and i was like okay that sounds great how long is it gonna take he said six months and i was like oh wow okay so i waited the six months i put a deposit down and now i have this green rolex hulk submariner which i kind of actually love so i bought this watch in late 2016 which was approximately four years ago and i bought it for about ten thousand five hundred canadian dollars okay and now when i look online the cheapest thing i can find i mean they go as high as thirty thousand canadian but the cheapest one i can find is about twenty four thousand that's probably what i would get for this watch so it's appreciated quite nicely it's been a good investment over the same time period if we compound that return you know going from 10 500 to 24 000. that equates to a 23 compounded return whereas the s p 500 over that period did 13.5 so this is really screwing with my mind right now because i was hoping to do this video and tell you guys that no rolexes are a bad investment don't buy them because stocks are income producing and they're way better um but the short run evidence appears to uh disagree with that but as a lot of watch collectors will know if you're fans of watches whatsoever this isn't really a good estimation of the average rolex because i got pretty lucky with this one and that guy on antiques roadshow he got massively lucky with his so let's maybe take a look at kind of the base rolex the most popular one and see what that has done over the same time period a steel banded black rolex submariner day-date or not data just the date it means it shows the date on it that's kind of one of the most common rolex watches and over the same time period from when i bought mine until now let's call it late 2016 until now that watch was priced at 9 500 canadian dollars and is now priced around 15 000 on average in the retail market so that again is a massive gain if we look at that relative to the s p 500 as we know we got about 13 and a half percent on the s p 500 over the last four years whereas the stainless steel submariner even just the basic submariner did 12.1 so it's only lagging the s p 500 by a little tiny bit which is crazy i never really thought that the returns on these watches were this reliable and maybe there's something i'm not seeing there's probably watch collectors out there that could tell me much better about the price changes but it appears to me that these things i mean at least in in the near past have done extremely well this is all great in theory because it's like oh this makes sense you buy a watch it goes up in value you get to wear this shiny thing and show all your friends that you have this really expensive watch but it's a little bit different in practice because you can't just walk into a rolex store and buy whatever rolex you want you know even recently i went in with a friend and i was blown away to find that in order to get the watch you want you would have to build a relationship with a jeweler and what do you mean by build relationship with is like buy three or you know two or three other watches that are 10 20 000 bucks just to prove that you're really in it and then you can get the watch you want so it's not so easy as just going and buying one because second thing if you're going to buy a watch you want you're going to have to buy it on the secondary market if you're not getting at retail you're gonna already be buying at an inflated price contrast that with the s p 500 you can easily buy that right now you can go set up a brokerage account and very simply just put the money in the stock market let it compound and now you have an income producing asset that's almost at least has much more of a guarantee of producing a return for you than a watch which is more speculative all of that being said we all know that s p 500 index funds are not nearly as fun to talk about with your friends as a rolex and chatting about the money you spent on your watch and networking with all the other collectors if you guys got any value out of today's video i just want to thank you so much for watching make sure to hit that subscribe button hit like and we'll see you guys in the next video [Music] you

Channel: Josh Olfert

Views: 5,960

Rating: 3.9411764 out of 5

Keywords: rolex investing, best investment watches, are rolex good investment, investing in watches, rolex price, most expensive rolex, rolex price go up, rolex submariner, buying rolex

Id: tn-wB529YvU

Length: 12min 49sec (769 seconds)

Published: Sat Jan 09 2021