Gentleman's Handbook 10.4: Investing in Watches

The five principles of smart collecting

By The Editors

The Five Laws of Luxury Watch Investing
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25 February 2016

You’ve heard the stories about Rolex Daytonas laying fallow for years on jeweler shelves in the 1960s, when the list price was but a few hundred dollars. Now a panda dial Paul Newman Daytona goes for about the cost of a starter home.

Not a bad 50-year return, eh?

Or how about a buddy of mine who found a near-mint Rolex SeaDweller at a local estate sale a couple of years ago and bought it for about half of what he could flip it for?

It’s stories like those that make you want to a shot at making the big bucks and having a little fun along the way.

But investing in hard assets — be they cars, art, coins, wine or watches — is a tricky business. As the joke goes, “How do you make a small fortune investing in hard assets? Start with a large one.”

Still, there are things you can do to hedge your bets when investing in a timepiece for (possible) future returns. Beyond, you, know “Buy low, sell high.”

Brands

The first thing a casual collector needs to know about investing in watches for a future return is that, for the most part, there are only two brands worth considering: Rolex and Patek Philippe.

Yes, you’ll hear about other brands. But those are for after you really learn the market and gain some sophistication. For beginners, Rolex and Patek Philippe are all you need to know. Of course, within those two brands, you need to study up on which watches are the most collectible. For instance, the early Rolex Daytonas, GMTs and Submariners are in higher demand than early Datejusts or Day-Dates.

And make no mistake. Studying is key. The more you know, the better choices you’ll make.

Condition Is Everything

It should go without saying that the better shape a watch is in, the more desirable it is. All parts should be original.

But patina counts too. That’s why “tropical” dials — black dials that have turned brown due to either impurities in the paints or actual exposure to sunlight (usually the former) — are so valuable. An aging lume on dial and hands that’s turned yellow, brown or orange can make collectors salivate as well.

Scratches? Who cares!? Those are scars, signs of an active life well lived — by the watch and its previous owners. NEVER polish an investment watch. You’ll remove thousands of dollars from its value with each application of the polishing wheel.


Eric Clapton's Patek Philippe

Provenance Is Even More Important Than Condition

Speaking of previous owners, if condition is important, provenance is doubly so. Consider a Patek once owned by Eric Clapton. It originally sold at auction in 1989 for $250,000. It was a rare watch to begin with (one of only two known to exist in platinum), but once Clapton got ahold of it, the value skyrocketed. It sold a few years ago for $3.65 million.

So along with the watch, make sure you get as much of its paper trail — original instructions, warranty cards, box, sales and service receipts, etc. — as possible.

Buy the Seller Before You Buy the Watch

This one is a truism in any sort of aftermarket dealing. Learn all you can about the watch, but really, learn all you can about who you’re buying it from. What’s his/her reputation? Where have they done business before, and with whom? How long have they been in business? Get references and testimonials. And listen to your gut.

When It Comes Time to Sell...

This is perhaps the trickiest part. You’ve got to know what your watch is worth — not just what your heart tells you it’s worth. That’s where more research comes in.

Will you go through a broker or an auction house? If so, be prepared to pay a significant commission. 20-30% is not uncommon.

And if you plan on selling the watch yourself, be prepared to negotiate on your own behalf. Negotiation is a skill that’s severely undervalued and you’d better be adept at it or you’ll lose your shirt when you sell your watch.

There’s more of course, but these five things will get you started. Hang out in the forums, keep an eye on Instagram, and read all the books and blogs you can. Who know, you might be wearing a Paul Newman Daytona before you know it. Just like Adam Levine.

—Ed Estlow

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