New haven: The rise of the luxury market

Bernard Arnault, chairman and CEO of LVMH, and an astute French businessman, art collector, and philanthropist once rightly said “It is only possible to make luxury margins when trading in luxury goods”. This articulation of the value of a bespoke, one-of-a-kind creation perfectly captures the allure of luxury goods as an alternative to run-of-the-mill investments. It combines passion with business and it speaks of an understanding of monetary value with a distinct appreciation for heritage and artistry.

Drawing inspiration from this thought and using luxury assets to their benefit, wealth investors have now become wealth creators. Multi-generational entrepreneurs and heirs hailing from family businesses have considered different avenues to not only diversify their investment portfolios but also satisfy their philanthropic needs. They have moved beyond what were once considered safe bets and over the years, they have developed an experimental temperament when it comes to spending their money.

Investments now are not restricted to substantial brick and mortar assets, such as real estate or blue chip stocks; instead, they are all about looking beyond conventional avenues. This newfound attitude has not only helped with cash liquidity but also yielded better returns. Over the last few decades, a considerable amount of HNI and UHNI wealth has been immersed in luxury watches, apparels, bespoke exquisite jewellery, classic cars, antique goods, and rare pieces of art. This dramatic increase in purchases can be attributed to the perception of flamboyance and suaveness that is attached to owning luxury goods.

With the festive season upon us, it would be wise to indulge in a bit of luxury while simultaneously investing in your financial future. Here is a list of blue chip luxury assets that are worthy of investment and are guaranteed to bring about festive cheer to your investment portfolio.

Luxury Watches

I have been passionate about horology for a long time. Luxury watches for me go beyond just a style statement, they represent heritage, class, and elegance, and most importantly, they are a good investment. Today, exceptional craftsmanship can be seen across the luxury watch industry, but for me, a truly exquisite time-piece is one that is steeped in history and comes from a long legacy of bespoke artistry. For example, owning a Jaeger-LeCoultre or a Rolex is not about just owning a watch but being a part of a lineage that goes as far back as the 1800s and 1900s. It is the equivalent of buying Reliance, ITC or an Infosys stock in today’s day. These watches not only stand the test of time but also steadily appreciate over a period of time. That is why I call them my blue chip investments.

Luxury Accessories

Over the years, luxury apparel has been akin to wearable art, with bespoke accessories such as handbags ruling the roost. From an investment standpoint, handbags have been a huge success in the luxury goods industry. According to the Knight Frank Luxury Investment Index, handbags recorded an average return of 13% in 2019.

Take for example the rare Hermès Bordeaux Porosus Crocodile Birkin which had a retail value of $52,000. In February of this year, Rally Road, a platform for buying and selling equity shares in collectible assets, sold shares to this bag at $26.25 per share. The almost 2000 shares offered by Rally were bought by 270 of its members in less than 7 minutes of its going live! Such is the value of luxury accessories in the market today.

Fine Jewellery/Diamonds

Diamonds and fine jewellery are all good bets for long-term investments. And although their value has been subjected to the vagaries of market volatility in the past decade, exquisite and luxury jewellery is still considerably good for investment purposes. Diamonds of 30 pointers and above are up by 3-5%, and mid-sized diamonds are up by 1%-2%, as per recent reports. Another advantage of investing in intricate jewellery and diamonds is that the maintenance fee is comparatively minimal. The portability of this asset adds up to the value, thus making it one of the best luxury investments.

Classic Cars

A collectible car that is rare, unique, and has historical value attached to it is a solid asset rather than a means of convenience. There are a handful of vintage and classic cars that exemplify the word ‘Mean Machine’ and garner better returns in the market. High-end collectibles that cost up to seven or eight figures are purchased by high-net-worth individuals to diversify their holdings, make money, and maybe even drive on occasion. The best examples of such cars would be, the 1935 Delahaye 135MS owned by Dalip Singh of the Royal Family of Jodhpur or the Gurney Nutting bodied Phantom II, Rolls-Royce – most preferred by the Maharajas in pre-independent India and Hispano-Suiza pertaining to their sheer technological prowess make them unavoidable blue chip asset.

Art

Investing in art has long been a go to route for many high net worth individuals because unlike other assets, its value is non-volatile. It does not even lose its worth over time, even if the market is not performing well, your art investment will remain untouched and safe from the volatility of market forces. In fact, the price of art may even increase with time. Recent exhibitions and auctions have made it more lucrative for investors to put up their prized collections for display and eventual sale, and even though these pieces move through multiple hands, the value proposition continues to remain high.

Research is always the key to making any good investment. It is always advisable to run a serious background check before choosing an asset to invest in. It is always wise to first understand brand equity, current market value, anticipated hike, and then determine if the asset is worth adding to your investment portfolio. Investments like these multiply in profit rather than only being a leisure time activity, hence, it is important to consider your personal taste and prospective for profit before making an investment.

Views are personal. The author is a proprietary index trader and technical analyst, Deen Dayal Investments.