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Is Rolex a Good Investment?

So you’ve decided to buy a Rolex, you’ve researched the models and picked the perfect watch for you. Besides maybe your house, or your car this could be the next biggest purchase you will ever make, so it makes perfect sense that the last question you have before going ahead and getting your dream watch on your wrist is ‘is Rolex a good investment?’. Depending on the Rolex you are buying it’s likely to cost you several thousand, or maybe either tens of thousands of pounds, so what will that investment look like several years down the line? Read on, it’s not a yes or no question, and may not even be the right question to ask. Our guide to Rolex as an investment will tell you why.

rolex oyster perpetual diamond bezel

What is an Investment?

To answer the question ‘Is Rolex a good investment?’ we first need to seek clarity on exactly what we mean by that. What exactly defines a good investment? What would be the successful outcome of any investment before we decide what we might invest in.

Investment – The action of putting money, effort, time into something to make a profit.
Source: Cambridge dictionary

We understand the purpose of an investment is to make a profit, so naturally a good investment, as a starting point would be one that makes a profit. For a full definition of a ‘good’ investment like this: -

‘A good investment is an investment that can make a good amount of money for you, when compared to other investments, that have the same amount of risk associated with them.’
Source: liberta.co.za

Having defined what a good investment is, with a general view of ‘Rolex’ I would say the answer to this question is generally no. But, is this really what we want to know? Rather than asking if Rolex is a good investment I believe the question we really want answered is how much is my investment in a Rolex likely to be worth in the future, so lets reframe the question and maybe we can provide a more useful answer.

mens-rolex-oyster-perpetual-gold-green

What is my investment in a Rolex likely to be worth in the future?

Without focusing on specific models there is, in my opinion a very generic price Lifecyle that most, if not all Rolex models will follow. From release as a new model to discontinuation generally most Rolex watches will follow the following stages: -

rolex-investment-lifecycleInitial Value
The original ‘new’ purchase price.

Initial Depreciation
The original ‘new’ purchase price minus dealer margin and any taxes applicable.

In-life Depreciation
Wear and tear value depreciation over time.

Price increase
As the prices of preowned watches will track the price of their new counterparts, any price increase will see the value of preowned Rolex watches appreciate. Ultimately, it’s the frequency and value of price increases that will govern the value and rate of appreciation over time.

Discontinuation
When Rolex withdraw the model from production, so additional new models are not put into the market.

Post Production Valuation
Once the production lifecycle is complete, the market valuation of your Rolex will continue to fluctuate, as the total volume of these watches in circulation begins to decrease. The combination of popularity and scarcity of your Rolex will determine what the valuation will be placed upon your Rolex investment for years to come.

Price ‘Noise’ Factors
No journey is ever straightforward and the journey of a Rolex investment through it’s lifecycle is not without it’s unpredictability. There are various noise factors that can impact the Rolex investment value along it’s lifecycle, and these include changes within currency fluctuations, Rolex production volume and tax & duty charges.

The Rolex Investment Lifecycle
To give an example of how this might look, here’s a view of the value of a Rolex investment over time. This is not limited to a particular Rolex, and valuations may increase /decrease at a faster rate depending on which model is purchased. This is not a picture of will happen but a model of what could based on previous experience!

rolex-investment-cycle-graph

The example given covers the in-life period of production. Although this is by no means an accurate model of future values we can draw the following conclusions.

• In the short term, an investment in a Rolex is likely to lose money in the immediate and short term.
• Over the medium to long term an investment in Rolex could appreciate in value
• The rate and value of Rolex price increases is likely to have the largest impact on value of the lifecycle.

To complete the picture, we need to consider what happens at the end of the production lifecyle for a Rolex watch, or what happens at the point of discontinuation.

rolex-investment-cycle-graph

Depending on the production volumes, length of production run, popularity, desirability and availability the valuation of a Rolex investment on discontinuation could either increase sharply, continue to plot a similar valuation path, or start to decline in value. We’ve seen recently the discontinuation of the Rolex Daytona 116520 and the Rolex Sea-Dweller 4000 116600 have caused the price to increase sharply as the number of newly produced models coming onto the market has ceased. It could be considered that depending on timing of purchase that theses watches could be considered a good investment prior to discontinuation, and may also continue to be.

Choosing the next best Rolex Investment

Over time we have seen that generally, the best Rolex investment has been in the sports model category, and of these the Rolex Daytona and Rolex Submariner valuations have both performed well over time. ‘Special’ editions or those in limited supply have also seen the valuation of the initial investment perform well over time, for example the Rolex ‘Hulk’ Submariner, the Rolex GMT-Master II ‘Batman’ and the Rolex Deepsea ‘Blue’. Discontinuation of a model as we have seen can also increase the value of a Rolex investment particularly when there have been ‘limited’ numbers produced. A recent example of this was the Rolex Sea-Dweller 4000, which was not overly popular whilst in production, but with a short production run in Rolex terms of only 4 years, discontinuation instigated a rush of buyers into the market trying to snap up the last available models often with a view that because of the low volumes produced, the value of the Rolex Sea-Dweller would increase for years to come.

rolex-submariner-hulk-green

Potentially then the best Rolex Investment would be one that has limited numbers produced relative to the number of potential buyers who would like to own that model, a ‘special’ edition, and a model that could face discontinuation. Although the last part is largely guesswork (did anyone see the Sea-Dweller 4000 discontinuation coming?) three Rolex watches that may go on to do well after discontinuation and have already been in production for a number of years are the Rolex Deepsea ‘Blue’, the Rolex Submariner ‘Hulk’ and the 50th Anniversary Rolex Daytona.

Whatever your choice, my personal view is that a Rolex watch should not be looked upon as a ‘Good’ investment, but rather a luxurious purchase to wear and enjoy, safe in the knowledge that over time, it will retain an amount of lasting value should you need it or wish to pass this on.