Investment or frivolity?

Could top-tier smartwatches be seen as an alternative investment for wealthy individuals? John Schaffer writes

Luxury watches from the likes of Rolex and Cartier have always been seen as a sign of opulence. Historically, these items have either held a significant amount of their value or have even been treated as an alternative investment.

 

Apple finally released its much-hyped smartwatch on April 24th, after being pushed back for months. Although the entry level models are certainly not cheap – a mere £299 for a watch with a plastic strap – the top-tier 18-karat gold editions fetch an astonishing £13,500.

 

Tag-Heur, the luxury Swiss watch brand, has announced that it plans to also release a smartwatch towards the end of 2015. Rumours are that the watch will retail at just under £1000 and will run on an Android based system.

 

Now I can understand the appeal of a new toy, but spending £13,500 on a piece of technology that will be relegated to the back of a sock drawer in a few years time is simply ridiculous.

 

Smartwatches simply cannot hold their value. As advancements in software and hardware moves at lightning speeds, any piece of technology has an element of inherent obsolescence.

 

The appeal of a luxury watch is that it is timeless. Even with the rapid growth of HNWIs from emerging markets, it seems unlikely that the top-tier of the smartwatch sector will catch on in a big way.

 

Of course, there will be individuals who will buy the top end apple watches to show off, but it is pure frivolity and is essentially flushing money down the toilet.

 

However, the lower end smatwatches may catch on, and only time will tell. Clearly banks have been racing to provide Apple Watch support, strapping on functionality to their existing digital channels. The smartwatches could potentially gain popularity in the mass market, but they are extremely unlikely to attain any investment potential.