💸 The Rise of Luxury Investments
Ever wondered how the rich create passive wealth? Luxury investments! How? Read on.
Have you ever wondered how the rich stay rich? How does their money make more money?
Well, the rich love expensive stuff. Be it a Rolex watch or some fancy bottle of alcohol, they're all in to buy it.Â
It is this love for luxury products that has now become a popular investment strategy in the town of the rich!
And these 'luxury investments' are the secret to their passive wealth creation!Â
Woahh. How?
ReadOn!
🤔 What are Luxury Investments?
Luxury investing is buying rare and premium goods with a heavy price tag.
Yep, anything and everything super fancy (read: expensive) falls in this category.Â
Rare art, watches, cars, bottles of fancy alcohol, handbags, and of course, jewellery.
You see, the world of the rich is fueled by a very strong desire to maintain 'status' in society.Â
And it is this desire that makes luxury products an investment.Â
The price of these products increases over time, as there's always someone willing to pay more for their precious 'status'.Â
But, let's dig deeper.
💸 Why are these luxury goods so expensive?Â
After all, a watch's purpose is to show time, be it a Rolex or a local.
What's so special about these "luxury" goods?Â
What makes the Hermes Kelly Rose Gold handbag worth $2 million?Â
Well, because it is encrusted with 1,160 diamonds!
Yes, diamonds are the easiest way to make anything super expensive.Â
Plus, only 12 such bags were ever created.Â
Yes, rarity is another factor shooting up prices of luxury products.
This is also a basic trait of humans. Give them anything rare and they'll go all in!
After all, it feels good to have something that others don't, no?
Patekke Philippe made only 7 pieces of the world’s most complicated wristwatch.Â
Result? Each piece was priced at $2.5 million and its resale value was even higher!
But, are these luxury investments even worth it?Â
Let's see.
💰 Returns From Luxury Investments
Here, look at the returns from luxury investments in 2022:
The luxury investment that gave the highest returns this year was art.
Luxury cars gave 25% returns last year and a whopping 185% in 10 years!
Rare whiskey bottles gave the lowest 1-year returns at 3%, but their 10-year returns were insane: 373%!
Now, let's compare this to the public markets:
Gold gave a 10-year return of 9.8%.
Nifty gave annualised returns of 20% over the last 10 years.
So, luxury investments seem like the key to making money, right?Â
Now, before you rush off to save for these luxury 'investments', let us also tell you about the risks involved.
You see, the luxury investments market is driven by emotions, by pure perception.Â
A Picasso painting might be all the rage today but its value may crash if some other painting becomes more sought after.
Yes, high returns come with high risks.
Despite these high risks, the super rich are chasing luxury goods.
According to Knight Frank India's 'Attitudes Survey' 2023, about 53% of ultra-wealthy Indians are likely to buy art, watches and luxury handbags, while 41% are likely to buy jewellery.
Now, this isn't just a run for status.Â
Luxury investments have also proved to be a hedge against inflation. They provide inflation-beating returns when many other investments fail.Â
And with the US Federal Reserve now thinking of pausing interest rate hikes, luxury investments could boom.
What are your thoughts on luxury investments? Would you ever invest in such luxury items?Â
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