I’ve been told all my life watches are a terrible investment but my friends have $2 million of their net worth in just watches

It’s not hard to imagine why many affluent folks are looking to watches as a means to store their wealth while showing off.

In this piece, we’ll look at the case of an individual who posted on the r/fatFIRE Reddit, inquiring if watches are worth buying as an alternative asset. They also note that their friends are putting a substantial sum of their net worth into watches (think Rolexes and all the top-tier brand names). But just because a friend is buying something does not mean you should. Indeed, purchasing anything without proper planning or expertise could lead to less-than-ideal results.

While buying a bunch of fancy watches could certainly make you a decent return over the long haul, I’d argue that a large watch collection entails a great deal of downside risk as well. And compared to stocks, I do believe that your average timepiece stands to fall short relative to traditional financial securities.

Does it make sense to view watches as an alternative investment?

Alternative assets can be a great way to grow your wealth while further diversifying your portfolio. Undoubtedly, there are some pretty stable “real” assets out there that can make investors money even through tough economic times and bear markets.

Precious metals, like gold, are some of the most glimmering of alternative assets that can help make a portfolio shine brighter in market climates where the “weather” stands to turn on a dime. And while I am an advocate for placing a bet on alternative assets, one must be able to tell the difference between an investment, a speculation, and a hobby purchase. 

Indeed, watches, like gold or just about any other physical collectible, are pretty to look at, and they can gain in price over time.

That said, while perceived as an investment for some, such timepieces are closer to a Hobbist collectible, at least for most people, in my humble opinion. Even if a sought-after watch is treated as a long-term investment (think a multi-decade holding period), I believe that, on average, it pales in comparison to other alternative investments, like real estate or even physical precious metals.

Watch collecting comes with its fair share of risks 

Indeed, buy the wrong watch and you can lose quite a bit of money, and if you’re using the watch, you have to account for the condition and potential depreciation over time. Furthermore, selling a watch can be a rather difficult task, given the relative lack of liquidity versus many other investments, especially if you’re looking to fetch a market price.

Can a watch be a sound investment? Definitely, but it can also be a speculation for those looking to buy and sell watches with the hopes of making a quick buck. Given the potential volatility and relative lack of performance relative to stocks, I’d argue that it only makes sense to “invest” in a timepiece if you’re doing it as a hobby and are not in it to make money because odds are, you’ll be disappointed with the results.

The same could be said for just about any other collectible, whether we’re talking about art, Pokémon or Magic cards, toys, antiques, or just about anything whose price is influenced by fluctuations in supply and demand.

The bottom line

Remember, just because a collectible can appreciate it does not mean it’s a good investment. If one is keen on putting a significant percentage of their net worth in a collectible, I’d strongly urge you to reach out to a financial advisor.

Perhaps a tiny chunk of your net worth can be put into such luxury assets, provided you’re getting into the watch-collecting hobby for reasons apart from making money. Collecting can be a rewarding hobby, but don’t expect to make a massive gain as you would in a more traditional financial security. But as far as buying millions in watches, I personally believe it’s not a financially sound move in the slightest. I think one would be far better off in stocks over the long haul if the primary goal is building wealth.

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