By: Justin Harpe
Maybe accompanying your wife or partner on all those shopping trips wasn’t a waste of time after all. As it turns out, high-end handbags have been shown to be a better long-term investment than shares or gold.
As unbelievable as it sounds, the data speaks for itself. Recent research compared three different types of investments: the S&P 500, gold, and Hermès Birkin bags – three investments chosen because they represent distinct and popular forms of investments. The S&P 500 is the main US stock market and reflects the overall return characteristics of equities as a whole, while gold is the most popular commodity for investors. Hermès Birkin bags were selected as they are a collectible and tangible investment. A timeframe of 35 years was selected for the research to reflect the date when Hermès Birkin bags were first produced.
For those of you not up to speed on your handbags, the Birkin bag is handmade in leather and named after actress and singer Jane Birkin. The bag is currently fashionable as a symbol of wealth due to its high price and use by celebrities. Prices range from US$11,550 to US$150,000.
Between 1980 and 2015, the S&P 500 produced an average annual return of 8.65%. However, this average doesn’t take into account the fluctuations of the stock market during this period and assumes the investor has chosen to neither buy nor sell for 35 years. For example, the S&P 500 annual returns peaked during this period in 1995 at 37%, but also reached an average low of -36% in 2008.
During the same period of time, gold surprisingly offered an average annual return of -1.5%. Once again, this average doesn’t take into account the fluctuations of the price of gold during this period and assumes the investor has chosen to stick rather than buy or sell during this period. For instance, gold reached a peak average price during this period in 2011 at $1,571.52, but also dipped to an average low of $271.04 in 2001.
However, over the same time frame, Hermès Birkin handbags increased steadily in value year on year, offering an average annual increase of 14.2%. But unlike the S&P 500 and gold markets, the value of Birkin bags has never fluctuated downwards and has consistently increased. The bags experienced a peak surge in value in 2001, increasing in value by 25%, with the lowest increase in 1986 when the value went up by 2.1%.
So the moral of this research could be to skip the gold, steer away from the tumbling stock market, and instead buy a Hermès Birkin bag. But in reality you still need to have a diversified portfolio. This means keeping assets in cash, equities and bonds. It can also stretch out to include property as an investment and commodities. Once you have such a balanced portfolio, then any spare cash can be channelled into so-called alternative investments. This is a diversified list that includes wine, paintings, classic cars, racehorses and even handbags. The market for alternative investments tends not to be as liquid as traditional investments so take care if you want to resell.
The handbag research was carried out by Baghunter, an online marketplace for buying and selling handbags. A spokesman said: “As a status symbol for the elite and ultra-rich, the main factor affecting the secondary market for Birkins is desire. All signs point to that desire remaining as strong throughout 2016 as it has been since the bag was released in 1985, with media outlets fawning over celebrities such as Kim Kardashian and Victoria Beckham who regularly sport their Birkin bags in paparazzi pictures.”
The bag was conceived when actress Jane Birkin was on the same flight as Hermès’ boss Jean-Louis Dumas and complained about not being able to find a good leather weekend bag. According to a 2014 estimate, Hermès produced 70,000 Birkin bags that year. Because the handbags are rumoured to have a waiting list of up to six years, such rarity has increased demand by collectors, and therefore their value, especially in Asia.