My daughter just had her 2nd birthday, so I have time before she starts dating.
But I read something last week that got me thinking…
Paul Newman had a daughter named Nell. And Nell had a boyfriend.
One day, Newman decided to give Nell’s boyfriend a present. But the present wasn’t a book, a bottle of Scotch, or a car. Instead, he gave him a watch.
And after holding onto it for a while, the boyfriend sold it for — get this — $17.75 million.
Uh, what? $17 million for a watch? What’s going on here?
And just as importantly, how can you get in on this action?
It All Started Here
Many experts consider Paul Newman’s Rolex Daytona Ref. 6239 to be the most significant watch in the world.
As one enthusiast told The New York Times, it’s the watch that "created the entire vintage watch market we know today."
The watch was a gift from Newman's wife in 1968. And for the next fifteen years, Newman was photographed wearing it many times.
But then, in 1984, he gave it to his daughter's boyfriend, James Cox.
As Cox told the story to The Wall Street Journal, he was helping Newman repair a treehouse at the time:
“Paul asked me what time it was, to set his watch. I replied, ‘I don’t know — I don’t have a watch.’ He was clearly surprised. So he said, ‘Here, here’s a watch. If you wind it, it tells pretty good time.’ At that time, I knew Rolex was an amazing brand, but I had no idea how significant the watch was.”
As the years passed, Newman's love for the Rolex Daytona became well known, and the myth about the one he gave Cox grew and grew.
For many years, the people who cared deeply about such things believed the watch had been lost. But then, one day, Cox resurfaced with it, and said he intended to sell it at auction.
A World Record
Various dealers thought it might sell for as much as $10 million, a sum that seemed unthinkable at the time.
I mean, it’s a good-looking watch. But $10 million?
As it turned out, the dealers underestimated its value by a mile.
In 2017, it sold for $17.75 million — at the time, a world record for a wristwatch sold at auction.
But nowadays, with so many investors turning to “collectibles” as an alternative to stocks and bonds, a $17-million watch with a pedigree like this one seems cheap.
Let me explain.
An Alternative to Stocks and Bonds
To kick things off here, let me summarize how most people invest:
Most folks stick with stocks, bonds, and ETFs. And if they’re really adventurous, maybe they’ll add some bitcoin.
But the rich invest differently. And this difference might explain why they keep getting richer.
You see, according to recent research from Motley Fool, the rich mainly invest in “alternative assets.” What are these alternatives? For starters, they include private startups and private real estate deals — the kind we focus on here at Crowdability.
But they also include collectibles like art, baseball cards, and you guessed it, watches.
As of 2020, the wealthy held about 50% of their assets in these alternative investments, and just 31% in stocks. The remainder was in bonds and cash.
Why would they do such a thing? Let’s take a look.
Three Reasons the Wealthy Invest in Alternatives
For starters, investing in alternative assets provides diversification. So even if the stock market is crashing, these assets can keep growing in value.
Furthermore, they offer a hedge against inflation. In inflationary times like we’re in today, that’s a valuable trick.
But perhaps most important of all, they can provide market-beating returns.
For example, over the last 25 years, early-stage startup investments have delivered annual returns of 55%. That’s about 10x higher than the historical average for stocks.
And meanwhile, according to the Motley Fool, over the last decade:
- Wine has shot up 127% in value.
- Classic cars have gone up 193%.
- And rare whisky is up an astonishing 478%.
Watches, meanwhile, are in a league of their own…
It’s not unusual lately for vintage watches to sell for millions of dollars.
For example, you’ve already learned about Paul Newman’s Daytona that sold for $17.75 million.
But a Patek Phillipe Grandmaster Chime sold for a whopping $31 million. This one was designed for Patek Phillipe’s 175th anniversary. It took seven years and over 100,000 hours to create. It’s the most complex Phillipe watch ever built.
So how can you start investing in watches like this — before they become so valuable, and for just hundreds of dollars instead of millions?
Let’s take a look.
Investing in Collectibles
Recently, a new type of website has emerged to give ordinary people the ability to invest small amounts of money into everything from fine wine to fine art.
Essentially, just like you can buy a $100 stake in a startup, now you can buy $100 worth of a vintage Bordeaux, a classic piece of art from Keith Haring, or a multi-million-dollar watch.
For example, on Otis, you can invest in collectibles including baseball cards, limited-edition sneakers, art, and watches.
And on Rally Rd, you can find everything from vintage Porsches to one-of-a kind offerings like the double-necked guitar used by Slash from Guns N’ Roses. It also offers a secondary market, so you can aim to sell your investments at any time.
You can invest whatever you’re comfortable with — $100 here, $100 there — and when the item sells, you receive your profits in relation to how much you put in.
Keep in mind, all the typical caveats about investing apply here:
For example, don’t invest more than you can afford to lose; invest in what you know; and be sure to dip your toe into the water before diving in.
Furthermore, many alternative investments aren’t entirely “liquid.” That means they can’t necessarily be converted into cash at the snap of your fingers.
So don’t invest your rent or grocery money into these offerings.
But if you’re looking to invest like the rich — and you’re not dating the daughter of a famous (and generous) actor — platforms such as Otis and Rally can be a great place to start.