12th September 2023
Investing in luxury fashion items can be a lucrative endeavour and is a possible alternative asset class to add to your portfolio. However, investing in fashion isn’t the same as shopping and requires careful consideration and research.
Here’s your 10-point checklist to guide you through the process of selecting a luxury fashion item as an investment:
🟪 Define Your Investment Goals: As always, the first place to start is determining your investment objectives. How much do you have available to invest and how soon are you looking to see a return? Why are you choosing to invest in fashion and what do you hope to do with your potential returns?
🟪 Research the Brand: Do your homework and focus on well-established brands with a strong history of value retention and demand.
🟪 Understand the Market and Trends: Just like any market, the market for luxury brands fluctuates too. Study the trends, demand and historical price movements. Keep an eye on current fashion trends and consumer preferences, as these can impact the item’s desirability and value.
🟪 Authenticity, Provenance and Documentation: When it comes to purchasing luxury goods, especially in the second-hand market, ensure the item is authentic by verifying its provenance through reputable experts or authentication services. Verify the item’s history, including previous owners and any notable events associated with it, as this can enhance its value. Ensure you have all the necessary documentation, including certificates of authenticity, receipts and any relevant records.
🟪 Condition: Again, if you’re purchasing through the second-hand market, inspect the item’s condition carefully. Mint condition pieces often command higher prices. Also, if you are using your investment for personal use too, ensure to take good care of it.
🟪 Rare and Limited Editions: Seek out rare or limited edition items as they tend to appreciate in value more quickly.
🟪 Material and Craftsmanship: Understand the quality of materials and craftsmanship, as these factors can affect both the item’s value and durability.
🟪 Risk Assessment: As with all investments, there is risk involved. Evaluate the risks associated with the investment, including potential fluctuations in the luxury fashion market as well as the risks involved with renting out items to strangers.
🟪 Storage and Maintenance: Ensure you have a secure and appropriate storage solution to preserve the item’s condition. Some luxury items require special care.
🟪 Exit Strategy and Tax Implications: Plan your exit strategy in advance. Know when you’ll sell the item and under what conditions. Remember to consider the tax implications of your investment, including potential capital gains taxes when you sell the item. Find out more in our Tax & Wrappers Course.
Remember that investing in luxury fashion items comes with inherent risks. It’s essential to balance your investment portfolio with other assets to create a diverse portfolio. Additionally, while the potential for profit exists, there are no guarantees in the world of investments, so only invest what you can afford to lose.