Last Updated: April 10, 2008: 5:19 PM EDT
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Investing safe haven: Collectible watches

Stocks too volatile? Bonds too boring? Then try an alternative investment - one you can wear on your wrist.

By Scott Cendrowski

Italian businessman Guido Castellini has been collecting watches since he could walk.

(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.

An alternative to bonds

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?"

Watch buying for beginners

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. To top of page

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General Electric Co 8.73 -0.17 -1.91%
Bank of America Corp... 26.55 0.18 0.68%
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Advanced Micro Devic... 20.38 0.15 0.74%
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Treasuries 2.71 0.00 0.04%
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