You've probably heard people talking about purchasing luxury designer handbags as wardrobe investments (aka investment bags). Many times, it seems like all this talk about handbag investments gets confused with financial investments. So I'll start by clarifying the difference between the two.
What is in an investment bag?
an investment handbag is basically a bag that has high quality and high desirability. Buying a investment handbag means buying a quality piece that will last over the long term and that you intend to use well (think cost per wear).
Can you have a collection of these handbags? Absolutely! But in my opinion, it should not be at the expense of your financial goals.
What is a financial investment?
A financial investment means putting your money in places where it will have the opportunity to compound, grow and create more wealth for you over time. Very few luxury handbag purchases increase in value over time unless they are Hermes, Chanel, or Louis Vuitton.
And even when they do, a variety of factors impact what you can hope to earn for them when you attempt to sell them. Let's talk them through.
4 Reasons why "investment handbags" are not great investments
Here are 3 key reasons why designer handbags are not great investments.
1. Designer handbags go in and out of fashion
In today, out tomorrow. That's how fashion works and the same applies to seasonal luxury handbags. In no way does that mean that you can't keep rocking your designer handbag long after you've purchased it. However, the chances that it will hold anything close to its original value when it was the hottest bag in town are very slim.
But who's to say that particular classic bag style or bag size will still be as strongly desired 5 or 10 years from now? The reason why these bags maintain value boils down to exclusivity and desirability. That's taking a big chance.
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2. Keeping your investment bag pristine is a must to retain its resale value
Pristine bags earn more money. In other words, you need to keep your handbag in perfect, like-new condition if you want to sell it to make a good amount of money in the future and get a return on your investment.
Unfortunately, a handbag showing signs of use and wear and tear is not going to get you the price of a brand-new bag. It doesn't matter what luxury brand made it. That's just the simple truth.
The condition of your handbag very much dictates what designer consignment stores, resellers, or individuals will pay for it. That's why it's so hard to make money on your investment bags if they are used heavily or not properly stored. Unless you don't use them, more than likely they will show signs of wear.
3. Investment bags are not as easy to sell as you think
Selling designer bags are a hard sell for a variety of reasons, specifically due to handbag authenticity, reseller fees, and fakes/scams. Let's discuss:
Ah yes, that. The authenticity of your investment bags happens to be a big deal because people want to make sure they are not buying fake handbags which are everywhere these days. Yes, you bought your handbag directly from the brand's store but you can't sell it back to the brand.
Unless you are a reputable handbag reseller or consignor, you will have to prove your bag's authenticity. This means you will need to have kept all your paperwork and receipts intact to be able to vouch for the authenticity of your bag.
While many online consignment stores will authenticate your bag for you, this service is typically built into the price they'll offer to purchase the bag from you.
As an individual reselling a handbag, a lot of buyers will try to take advantage of the fact that you are selling as an individual and try to get you to sell cheaper.
If you choose to go the reseller or online luxury consignment store route (where a reputable company sells the bag for you), you will probably pay them super high commission fees off the selling price.
A reputable consignment service will charge you anywhere from 15% to 40% of the sales price of your handbag. As a result, at the end of the day, you'll be making less money on your sale. Another reason investment bags are not the best way to invest your money.
Scammers and fakes
There are tons of stories of people being scammed all the time. So you need to take extra precautions about where, how, and to whom you sell your bag to, in order to make sure you get your payment in full and you don't get scammed.
4. The cost of insurance
For designer bags that have a significant price point, it may make sense to insure your handbags. However, handbag insurance can run you several hundred to several thousands of dollars each year. It all depends on the value of your handbag collection.
Over time, the cost of insurance added up, can be a pretty significant expense. And this insurance cost is an indirect loss on the value of your bag.
Key things to keep in mind when buying investment handbags
When it comes to considering designer handbags as an investment it's important to have the right expectations.
They can be great wardrobe investments
A quality designer handbag can be a great wardrobe investment. It's designed to last you a long time and will look beautiful along the way because of its quality.
Don't expect to sell them for a profit - it may not happen
Selling your designer bags years later for a profit is only true for certain designer bags and that itself comes with several caveats. If you plan to sell your handbags in the future expect to earn a fraction of your purchase price. If you earn more, great! But don't bank on your handbag sale for your nest egg.
Purchasing luxury bags should be based on your disposable income
In other words, don't take on debt to buy handbags. Compounding interest on credit cards can totally eliminate and profit you hope to make on a future handbag sale.
Purchasing luxury bags should be based on your disposable income after your expenses and savings goals are met. Renting a designer bag to try it out before you commit to buying could also make sense for you.
If you have debt, it's a better idea to forgo the handbag, get rid of your debt, and plan for a luxury handbag later when you can truly afford one.
There are better ways to invest
A better alternative to investing in handbags? Put your money to work for you by diversifying into various financial investments like stocks, bonds, real estate, business, etc.
Focus on building real wealth first and then you can buy all the handbags you want and enjoy them the way you want to without having to think of them as financial investments because they are really not.
Invest for success
Rather than investing in expensive handbags, think of investment opportunities such as stocks, bonds, and real estate investing. Learning how to invest the right way is the key to financial success.
Creating multiple streams of income and becoming a savvy investor will enable you to live your best life. You don't need a ton of money to get started investing. Get started learning how investing works and grow your money!