Are luxury bags an investment?

Are luxury bags an investment?

I guess in the age where luxury hauls and vlogging are on the rise, a lot of people are probably asking this question in their heads. And also, a lot of luxury and lifestyle vloggers are quick to throw around the word INVESTMENT when talking about luxury handbags without really qualifying the term. I just felt compelled to write a post and shoot a video that explains how and when luxury goods become an investment and most importantly, how and when they are not.

So how do luxury bags become an investment? Which luxury brands and bags are categorized as investment brands and pieces? I'll talk all about that below.

First, let us be clear about the real definition of the word INVESTMENT and let's all agree with that.

WHAT IS AN INVESTMENT?

According to Investopedia, an INVESTMENT is "an asset or item acquired with the goal of generating income or appreciation". Investment is a term that is always tied to finances. 

That said, if the bag brand you buy depreciates massively in value, from price to perceived value, then that is not an investment no matter how expensive the bag is.

I think for most Filipinos, when they say it's an INVESTMENT, it's more of a justification rather than a description. When Filipinos make big purchases, they automatically categorize it as an 'investment' to justify the amount of money that they had to shell out; categorizing an item as an investment is almost always tied to the price of the item, not really the value. 

That said, I hope more Filipinos will remember and take this to heart: INVESTMENTS ARE NOT DETERMINED BY PRICE; THEY ARE DETERMINED BY VALUE.

To illustrate my point further: for example, I buy a Balenciaga bag now at P140,000 and Solana crypto at P30,000; based on the common understanding of Filipinos of what an investment is, we would think a Balenciaga is more of an investment than the Solana crypto. But down the line, Balenciaga's price will no longer be P140,000 if you sell it eventually, but Solana crypto can be P90,000 at the same time if that crypto becomes popular. So between the two, based on the book definition of INVESTMENT, Solana is the investment because its value increases versus the Balenciaga bag even if the latter is 3.5 times more expensive.

ARE LUXURY BAGS CONSIDERED AS INVESTMENTS?

The answer is it depends on the brand and the bag.

WHICH LUXURY BRANDS ARE CONSIDERED AS INVESTMENTS?

In the retail luxury market, the three luxury bag brands that are considered as investments are the following:

1. LOUIS VUITTON- because it's considered as the most valuable luxury brand in the world; overall the most popular; perceived value is always high and even if it's a depreciating asset, value depreciation is not as bad as other luxury bag brands therefore it is an asset.

2. CHANEL- one of the most expensive bag brands in the world. Chanel's famous Classic Flap is considered a better investment than gold at some point because of it's skyrocketing prices in the boutique and second hand market. Most classic flap owners can always get what they paid for or more when they sell their bags in the future.

3. HERMES- the most expensive retail luxury brand. The Hermes Birkin is the most popular yet it's very hard to get as Hermes only sells their famous bags to a select few. A Birkin bag is always sold twice its boutique price in the second hand market or more, depending on demand, which always guarantees sellers a 100% markup on sale.

Unfortunately, other bag brands such as Bottega Veneta, Gucci, Balenciaga, YSL, Dior, and other luxury brands are not considered as investments because these bags, aside from you can't sell them above retail price any longer, can be bought at a much cheaper price in outlet stores in select countries. If a luxury bag goes on sale, it is not truly luxury; I would just like to call that a very expensive handbag.

Chanel Le Boy, considered a house classic and one of Chanel's investment pieces

WHICH LUXURY BAGS ARE CONSIDERED AS INVESTMENTS?

So these are based on research and also my own humble opinion:

1. Louis Vuitton- multi- pochette accessoires, mini pochette, on-the-go totes, Capucine, Twist

2. Chanel- Classic Flap, Le Boy, Reissue, Trendy CC (potential new house classic)

3. Hermes- Birkin, Kelly, Constance, Lindy (potential new house classic)

Now you know which bags to invest in, if you really want to genuinely INVEST in luxury hand bags.

HOWEVER.

The styles I have mentioned above are the only ones considered as investment pieces. If you buy a non-investment bag from an investment brand, still, that's not considered an investment; what always matters is your item should appreciate in value overtime for it to be considered as an investment.

ASSET VS. INVESTMENT:

To end this post, I'd like to talk about asset vs. investment in the case of luxury handbags.

An asset is also an investment, but I'd like to think that there are two types of assets: appreciating and depreciating.

Louis Vuitton is in the depreciating segment because you can never sell any of their bags above retail price, but compared to other bag brands, Louis Vuitton bags can retain their value better and don't depreciate as fast as other brands. One example is my 11-year old Neverfull, which I can still sell for P15-20,000 based on the running price in the second hand market and I got the bag for P43,000 in 2011! That's only a little over 50% depreciation in the last 11 years! Amazing!

When vloggers say that their luxury purchases are 'INVESTMENTS', I think what they're trying to convey is it's more of a PERSONAL INVESTMENT rather than a financial one: the item makes them feel good, it's their dream item, it betters their lives, and it suits whatever purpose they have. The luxury item they have may not appreciate in value down the line, but emotionally and functionally, they get a lot out of it, therefore it's worth the PERSONAL INVESTMENT.

As a final note, I wish influencers would qualify why they would say that their luxury purchases are INVESTMENTS regardless of the brand and item. Because us vloggers can influence viewers and the last thing we want our followers to become are people who keep on putting their money in things that are not really investments and thinking that handbags are the be-all and end-all of all investments. It's wrong!

 

I've also made a video for this topic and I've explained here in detail why the three luxury brands are considered as investments and I've also delved deeper into this topic. Watch HERE. Enjoy!

Let me know what you think of this post! How about you? Do you consider luxury goods as investments?