Did you see Monday’s Wall Street Journal?
While the rest of the media world was covering the mess around Silicon Valley Bank, the Journal ran a fascinating story.
The story is about a little-known market that’s beating stocks by a whopping 250%.
Today, I’ll explain what this market is…
Then I’ll reveal how you can take advantage of it to earn big profits outside of stocks.
An Alternative to Stocks and Bonds
To kick things off here, let me explain how most people invest…
Most folks stick with stocks, bonds, and ETFs. If they’re adventurous, maybe they’ll add some bitcoin.
But the rich invest differently. And this difference might explain why they keep getting richer.
You see, according to recent research from Motley Fool, the rich mainly invest in “alternative assets.” What are these alternatives? Well, for starters, they include private startups and private real estate deals — the kind we focus on here at Crowdability.
But they also include “collectibles” like art, baseball cards, and vintage Scotch.
As of 2020, the wealthy held about 50% of their assets in these alternative investments, and just 31% in stocks. The remainder was in bonds and cash.
Why would they do such a thing? Let’s take a look.
Three Reasons the Wealthy Invest in Alternatives
For starters, investing in alternative assets provides diversification. So even if the stock market keeps crashing like it’s been doing recently, these assets can keep growing in value.
Furthermore, they offer a hedge against inflation. In inflationary times like we’re in today, that’s a valuable trick.
But perhaps most important of all, they can provide market-beating returns.
For example, over the last 25 years, early-stage startup investments have delivered annual returns of 55%. That’s about 10x higher than the historical average for stocks.
And meanwhile, according to the Motley Fool, over the last decade:
- Wine has shot up 127% in value.
- Classic cars have gone up 193%.
- And rare whisky is up an astonishing 478%.
But another asset class is in a league of its own…
The asset class I’m referring to might surprise you:
Preowned luxury watches.
The Journal’s headline said it all:
“Used Rolexes Are Beating the Stock Market”
As the article explained, preowned luxury watches are outpacing “the overall stock market, growing about 20% annually from mid-2018 through this January, compared with the S&P 500 index’s yearly growth rate of 8% during that period…”
And as the article went on to say (the added emphasis is mine): “More collectors have seen watches as not just accessories but also as investment pieces that can hedge against inflation and diversify their holdings.”
A $25 Billion Market
This is a big market. According to the Boston Consulting Group (“BCG”), preowned watches in 2021 accounted for nearly a third of the $75 billion luxury watch market worldwide. That’s $25 billion.
But given that vintage watches can sell for millions of dollars, this makes sense. For example:
- A Patek Phillipe Stainless Steel “Grand Complications” sold for $7.2 million.
- A Rolex “Paul Newman” Daytona sold for $17.7 million. Manufactured in 1968, the watch was a gift to Paul Newman from his wife.
- And a Patek Phillipe Grandmaster Chime sold for a whopping $31 million. It took seven years and over 100,000 hours to create.
According to BCG, the most popular secondhand watches include the Patek Philippe Nautilus, the Audemars Piguet Royal Oak, and the Rolex Daytona.
And as the Journal wrote on Monday, one of the most “colorful models on the secondhand platforms this week included a rose gold Audemars Piguet watch with rainbow sapphires.”
It’s listed for about $315,000. Here it is:
So how can you start investing in watches like this — before they become so valuable, and for just hundreds of dollars instead of millions?
Let’s take a look.
Investing in Collectibles for $100
On online platforms including Chrono24 and Watchfinder & Co, you could spend tens or even hundreds of thousands of dollars on a single watch.
But recently, a new type of website has emerged to give ordinary people the ability to invest small amounts of money into everything from fine wine to fine art.
Essentially, just like you can buy a $100 stake in a startup, now you can buy $100 worth of a vintage Bordeaux, a classic piece of art from Keith Haring, or a multi-million-dollar watch.
For example, on Otis, you can invest in collectibles including baseball cards, limited-edition sneakers, art, and watches.
And on Rally, you can find everything from vintage Porsches to one-of-a kind offerings like the double-necked guitar used by Slash from Guns N’ Roses. It also offers a secondary market, so you can aim to sell your investments at any time.
You can invest whatever you’re comfortable with — $100 here, $100 there — and when the item sells, you receive your profits in relation to how much you put in.
On sites such as these, you can find watches from Rolex and Patek Phillipe, as well as James Bond’s choice, Omega. For example, an Omega Seamaster that originally retailed for about $1,000 was recently being offered for $3,895 — giving its owner a potential profit of about 289%.
Keep in mind, all the typical caveats about investing apply here:
For example, don’t invest more than you can afford to lose; invest in what you know; and be sure to dip your toe into the water before diving in.
Furthermore, many alternative investments aren’t entirely “liquid.” That means they can’t necessarily be converted into cash at the snap of your fingers.
So don’t invest your rent or grocery money into these offerings.
But if you’re looking to invest like the rich, alternative assets like preowned luxury watches are a great place to start!