Investing safe haven: Collectible watches
Stocks too volatile? Bonds too boring? Then try an alternative investment - one you can wear on your wrist.
(Fortune Magazine) -- Some are born watch collectors; some become watch collectors; and others have watch collections thrust upon them. Guido Castellini fits all three profiles: He inherited his grandfather's 19th-century pocket watches, could tell a Longines from a Patek Philippe in grade school, and remembers when his grandmother brought him to the antique dealer as a teenager for his first Rolex.
"From that day I invested part of whatever I had in watches,'' says Castellini, who co-founded a small Milan investment house and now lives in Luxembourg and Italy.
"The market has evolved since the early '80s, when watch collecting was a hobby," says Julien Schaerer, watch director at New York auctioneer Antiquorum. "There's definitely more interest." That's partly because unlike most accessories, the best watches hold - or increase - their value.
Castellini started considering watches a serious alternative to bonds in his late 20s, trading a handful of watches a year with the help of a trusted network of dealers in Milan and Geneva, targeting undervalued models.
These days he has more than 30 watches in his collection - from a unique Tiffany & Co. (TIF)-branded Patek to a Rolex Daytona and a limited-edition Jaeger-LeCoultre. He's certainly picked some winners, such as the Patek with perpetual calendar and moon phases he got for around $9,000 at age 18, which now auctions for north of $250,000.
Overall, Castellini estimates that his typical return on a watch over five to ten years is roughly 10%. He'd do better in an index fund, but, as Castellini jokes, "What other investment is so wearable?"
What Aaron Rich, head of watches at Sotheby's in New York, looks for in a vintage watch:
The papers: Ask for the certificate of origin to guarantee you're buying a genuine piece.
Wear and tear: Scratches are good, sort of. Marks on the side of and underneath a watch's case show that it hasn't been polished or brushed, which reduces value by 20% to 40%.
Stamps: Some manufacturers stamp their seal or mark gold content on a case's underside. You can see these with a loupe.
Monograms: On a modern watch, initials take away a lot of value. But for watches more than 50 years old, when monogramming was popular, Rich says it's almost irrelevant.
Bands: "Never, never turn down a watch because of its band," says Rich. An original helps pull top dollar, but a replacement affects value less than other factors.
Dials: Use a loupe to inspect it. Many dials are made with some silver, which naturally tarnishes from water and polluted air. So an older watch should have dirty spots.
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