Have you ever browsed the internet or went shopping at the mall and found the cutest designer handbag? You can afford it because you knocked out debt, saved, and are now working towards building up your investing portfolio. Yet, the price of the bag still makes you feel uneasy. We often hear commentary about how buying designer items is irresponsible or that anyone who buys luxury items are actually broke. That is not always the case based on the scenario I mentioned above. I am here to say that if you can afford the designer handbag and truly want it, it can actually be a great investment similar to the likes of buying stocks or bonds. Let’s dive deeper.
Luxury Investments
As we all know, the most common types of investments include stocks, bonds, real estate, businesses, etc. These are the types of investments that we see everyone talk about daily on social media. Besides those common types of investments, there are other “non-traditional” ways you can invest your money and diversify your portfolio if you are a big baller or manage your money well. Other types of investments besides those previously mentioned include art, classic cars, fancy whiskies, and designer handbags. I am sure there are more items out there that are considered investments but these are the most common based on my observations and research.
These items are more than just emotional purchases because they typically have a high resale value and go up in value after 10 years if held. According to an academic study, art appreciated in value by a modest 3.97% per year based on 1.2 million sales of paintings, drawings, and prints. I can also add that 81% of high-net-worth investors stated that they would like for financial advisors to incorporate art and collectable services into their wealth management offerings. When you visit an auction house, art gallery, or luxury shop, be sure to really study the items that interest you most because they can become extremely valuable in the future.
The Birkin Bag
In 2020, there was an entire social media craze over the Hermes Birkin bag that literally lasted a few months. What is the obsession with this type of handbag? Well, these handbags are rare and carefully crafted. Some people even explained how they literally had to build a relationship with a Hermes sales associate and show purchasing loyalty before being considered for the wait list. That may seem ridiculous, however these bags are highly sought after with the most expensive Birkin priced at a whopping $384,285. Hermes Birkin bags are typically priced between $9,000 and $150,000 with a resale value up to $223,000. If you decided to purchase a Birkin bag at $10,000, you could immediately sell it for $12,000 according to luxury resellers and experts.
The Birkin bag is typically worn by high net worth celebrities and those of the elite class which gives the bag even more appeal. The average shopper can also obtain one with excellent money habits and a good relationship with a Hermes sales associate. However, that can take years to build. If you are able to obtain a Birkin bag, make sure to take care of it as these bags typically hold value and appreciate over time.
The Chanel Bag
The Chanel bag is one of the most popular designer handbags on the market with current prices typically ranging from $3,200 up to $32,500 per bag. Regular people like me, and most of those reading this article, have a better chance of owning a Chanel bag because they are a little easier to purchase than the Hermes Birkin bag. You can literally order one on line from your couch or join a wait list without building a relationship with a Chanel sales associate. So, why are these handbags considered an investment? Chanel bags are limited and often sale out fast. They are created with quality materials and offer long lasting value. In one study a few years ago, it was found that a $1,600 Chanel bag outperformed the S&P 500 with a 206% return over 10 years, whereas the S&P 500 performed at 49% (these amounts are not adjusted for inflation). That means the bag went from being worth $1,600 to $4,900. Chanel bags also increase in resale value over time.
Treat Yo’ Self The Right Way
So, investing in high priced luxury items is not necessarily irresponsible or a waste of money when you can afford it. It is okay to treat yourself every now and then to something expensive after crushing your money goals. After paying off debt and building an emergency fund of 3 to 12 months (whatever works for you), you can take your foot off of the gas pedal a little bit and make room for purchases that make you happy. I am not saying to blow your whole pay check (you should be budgeting every month anyway), but collecting designer items or making luxury purchases is not a bad thing especially when many of these items appreciate over time or can be sold for a higher price later on. It can actually be worthwhile if you take care of your designer items. Research works of art, designer handbags, and other luxury investments before purchasing like you would do with stock to ensure a high ROI (return on investment) and let the haters hate.
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