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Gold vs. Hermès Birkin Bag: Can designer handbag be a better investment?

Gold vs. Hermès Birkin Bag: Can designer handbag be a better investment?

Recently, it seems like every major media outlet has reported that the famous Hermès Birkin handbag is a better investment than gold, stocks or art. 

For example, Time Magazine reports that “The Birkin bag outpaced both the S&P 500 and the price of gold in the last 35 years— a time period chosen to reflect the date when Birkin bags were first produced in 1981”. 

According to Times Magazine, “The annual return on a Birkin was 14.2%, compared to the S&P average of 8.7% a year and gold’s -1.5%”.

Seems impressive, right?

While the information listed above might be accurate and reliable, the reality is that this luxury handbag is not a better financial investment.

Here are five simple reasons why:

1. It can be extremely hard to get hold of a Hermès Birkin Bag even directly from the store.

An auction expert Max Brownawell states that “Your average woman can’t just walk into Hermès and buy one. You’d have to have a long-standing relationship with one of their sales associates”. 

That’s right. Even if you had financial means to buy a Hermès Birkin Bag right now, it doesn’t mean you’d be successful. Most likely, you’d have to get on a waiting list and wait, wait, wait. Sometimes for months or even years. 

The DailyMail reports that since Hermès handbags are favorites of the super-rich and A-list celebrities like Victoria Beckham, Catherine Zeta-Jones and Kris Jenner, their distribution is strictly controlled.

2. Can you buy a Hermès Birkin Bag from resellers?

If you don’t feel like waiting for months or even years, you can explore the reseller route. However, be aware that the reseller margin can be anywhere from 25% to 100%.

Yes, that’s correct. Some Hermès resellers will sell you a brand new Birkin handbag at 25% to 100% more than what it actually costs at an official Hermès boutique. For more about this, take a look at a recent article in the New York Times.

All in all, between the lengthy wait at Hermès and the shocking reseller fees, you can forget that 14.2% annual return.

Additionally, you’ll need to buy at least a few of these luxury handbags if you really envision yourself retiring on your Birkin investment.

Just think about it: 14.2% of ~$12,000 (the price for a basic Birkin handbag) will only be $185,000 after 30 years. Clearly, this amount is insufficient to retire on if retirement itself lasts 20 to 30 years.

Hermès Birkin is a family-run business committed to maintaining the majority of its production in France, through its 43 production sites, while developing its international distribution network of 311 stores in 45 countries.

3. Insuring your investment will cost you… Extra.

If you’re willing to spend $12,000+ on a handbag as an investment, you sure want to get it insured. God forbids your bag gets stolen or ruined in a house fire. Personal article insurance, which provides coverage for all kinds of personal belongings like jewelry, clothing, precious stones and other items, is expensive. It can cost you hundreds to thousands of dollars a year, depending on the insured’s value.

4. You need to take extra care of the Birkin handbag to maintain its value

Suppose you’re thinking of purchasing the Birkin handbag as an investment (especially with an idea to sell it later). In that case, you have to keep it in a perfect, like-new condition. A visibly used handbag will not get you the price of a brand new bag, which means you’ll lose money.

5. Selling this type of investment can be challenging

Unless you are a professional handbag seller, you will have to prove your Birkin bag’s authenticity to a potential buyer. From having all your paperwork intact to being ready to demonstrate the authenticity of the bag, it’s a lot of work.

Some buyers will even go as far as to ask for documentation from actual authenticators which will cost you additional money and time.

Moreover, you need to be careful about where and to whom you sell. Make sure you don’t get scammed and get your payment in full.

In conclusion

While designer handbags are luxury clothing investments, they are not financial investments. You buy them because you love them, and if eventually, you choose to sell them, that’s great. However, it should not be the primary strategy behind your financial portfolio.

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