{"id":53818,"date":"2023-08-28T05:37:44","date_gmt":"2023-08-28T09:37:44","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/investing-in-luxury-goods-during-inflation-how-to-do-it-and-when-not-to\/"},"modified":"2023-08-28T05:37:46","modified_gmt":"2023-08-28T09:37:46","slug":"investing-in-luxury-goods-during-inflation-how-to-do-it-and-when-not-to","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=53818","title":{"rendered":"Investing in luxury goods during inflation: How to do it and when not to"},"content":{"rendered":"

This <\/em>article<\/em> is reprinted by permission from <\/em>NerdWallet<\/em>.\u00a0<\/em>The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.<\/em><\/p>\n

Some people collect luxury goods such as investment pieces. Think of a Birkin bag, art by the legendary Jean-Michel Basquiat or a Rolex. Anything considered timeless or high-quality and that appreciates in value can be called an investment piece.<\/p>\n

\n

The luxury market tends to be more resilient than other sectors during economic instability because of high demand, among other factors. That said, is this inflationary period a good time to invest in luxury goods?<\/p>\n

Buying luxury goods amid inflation<\/strong><\/h2>\n

The U.S. Federal Reserve has raised interest rates 11 times since March 2022 in an attempt to cool inflation. Interest rates are the highest they\u2019ve been in 22 years, and consequently, we\u2019ve seen the cost of borrowing increase and spending on nonessential goods decrease.<\/p>\n

While Americans have cut back on spending, the demand for luxury goods is still strong. Research by J.P. Morgan
\n JPM,
\n -0.12%<\/bg-quote>
\n shows a 7% year-over-year increase in the luxury goods market in the fourth quarter of 2022, despite significant price hikes.<\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Luxury brands raised the prices of their products by almost 17% in 2020 and early 2021 in response to lower sales during COVID-19, according to a 2022 study by KPMG International. This change is significant considering typical price increases are 5% to 10%. These price increases didn\u2019t only benefit luxury brands; people who invested in these goods in prior years may have also seen gains.<\/p>\n

Gloria H. Gill, a retiree who we spoke to on Facebook Messenger, said the value of her large classic Chanel bag has more than doubled in about seven years. Gill purchased the bag for $4,800 in Paris in 2016. It now has a market value of around $10,000.<\/p>\n

\u201cI have sold bags before, but I doubt I\u2019ll sell this one,\u201d Gill said. \u201cIt\u2019s listed in my will, and my sons are aware of its high value.\u201d<\/p>\n

See<\/strong>: Guess how much a diamond Herm\u00e8s Birkin fetched at Sotheby\u2019s mega handbag auction<\/p>\n

Luxury goods can sometimes hedge against inflation when they appreciate in value, says William Huston, founder of Bay Street Capital Holdings, which has offices in Los Angeles, New York and Fremont, California.<\/p>\n

\u201cThese luxury goods, they do protect against inflation, but they don\u2019t outperform the general stock market,\u201d he says.<\/p>\n

As with any investment, there are risks. As Huston points out, your money could potentially earn a higher rate of return elsewhere. Also, your item could get lost or destroyed, or it may be difficult to resell.<\/p>\n

From the archives (Oct. 2022):<\/strong> This Lay\u2019s x Balenciaga potato chip bag reportedly costs $1,800. Who\u2019s biting?<\/p>\n

Assess your financial foundation first<\/strong><\/h2>\n

Before investing in anything,\u00a0assess your financial situation. For instance, is your emergency fund well stocked? Keep in mind that possessions are considered \u201cilliquid assets\u201d \u2014 not quickly convertible to cash if you need it in a pinch.<\/p>\n

Also,\u00a0saving for retirement\u00a0comes before investing in luxury goods, says Dora Meyer, a certified financial planner at WellAcre Global Wealth Advisors in Santa Monica, California.<\/p>\n

\u201cMake sure you are taking advantage of any tax-advantaged accounts, so your 401(k), your Roth IRAs, before you look at investing in something like this. [And] your HSA,\u201d she says.<\/p>\n

Meyer also advises, \u201cBe careful [with] buying on credit, especially in this environment when interest rates are a little bit higher.\u201d And she recommends buying from a reputable source to avoid knockoffs.<\/p>\n

Check out: <\/strong>What\u2019s in the $60,000 Grammy gift bags that Beyonce, Taylor Swift can take home<\/p>\n

<\/p>\n

<\/p>\n

\n Art-investment platforms take artworks \u201cpublic\u201d, in a similar fashion to a company\u2019s initial public offering (IPO), allowing investors to own fractions of million-dollar paintings. Here\u2019s how it works.
\n <\/figcaption><\/figure>\n<\/p><\/div>\n

Investing in timeless pieces<\/strong><\/h2>\n

Valerie Schwank owns the Fashionista Consignment Boutique in Coconut Grove, Florida, where she buys and sells luxury goods. Schwank has seen a significant boom in her business since the pandemic began and is an advocate for investing in luxury pieces. She recommends buying timeless and high-quality pieces, as they tend to hold their value.<\/p>\n

\u201cI always recommend that you buy a staple,\u201d she says. And by staple, Schwank means \u201cthe Chanel classic double flap, no-nonsense handbag, which has been around forever.\u201d<\/p>\n

Think about factors like the color and materials of items, too. That often differentiates timeless luxury goods from ones that won\u2019t hold as much value over time. Keeping your items in good shape, especially if you plan to resell, is also important, Schwank says.<\/p>\n

From the archives (Feb. 2020)<\/strong>: Air Force vet after learning how much the Rolex he bought for $345 in 1974 is worth today: \u2018You gotta be sh***ing me?\u2019<\/p>\n

Calculating your potential returns<\/strong><\/h2>\n

Research how an item has historically performed before purchasing to ensure it\u2019s a worthwhile investment. You can go to luxury resale sites such as Vestiaire Collective, The RealReal and Rebag and check how pieces have appreciated over time.<\/p>\n

Huston advises having a\u00a0financial plan\u00a0before making a luxury investment. \u201cWith the financial plan, you\u2019d be able to see, \u2018I\u2019m 30 years old, I\u2019m gonna save $300 a month,\u2019\u201d he says, as an example. That plan can give you context to decide, \u201c\u2019That\u2019s a meaningful amount of money to me and I can afford that $300, and it\u2019s better for me to save $300 in my 401(k) than to buy a watch,\u2019\u201d he says.<\/p>\n

You can also improve your investment returns by negotiating when it comes to items like art, he adds.<\/p>\n

\u201cA lot of this luxury stuff is negotiable because again, it\u2019s illiquid\u201d and not easily converted to cash, he says. \u201cSo if you find the right person selling the right thing at the right time, you can get it for a really good value because they just want to get some of their money back.\u201d<\/p>\n

Elizabeth Ayoola writes for NerdWallet. Email: eayoola@nerdwallet.com.<\/em><\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

This article is reprinted by permission from NerdWallet.\u00a0The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. Some people collect luxury goods such as investment pieces. Think […]<\/p>\n","protected":false},"author":1,"featured_media":53819,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-53818","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nInvesting in luxury goods during inflation: How to do it and when not to | iFintechWorld<\/title>\n<meta name=\"description\" content=\"This article is reprinted by permission from NerdWallet.\u00a0The investing information provided on this page is for educational purposes only. 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