Invest in Luxury Companies Rather Than Products

LVMH (Louis Vuitton Moet Hennessy) is one of the most significant companies in the world with an incredible market cap that has been inching towards $1 trillion in recent years. Luxury products are in high demand, so the companies behind these products rake in trillions of dollars annually with profit margins that most other industries cannot imagine. Investing in such companies can be a savvy financial decision if done right. Here is how you can achieve success by investing in luxury goods companies. 

Expensive vehicles are perhaps the most popular example of luxury in everyday life. Few things communicate your wealth like driving the coolest, newest, and fastest cars. People who can afford these vehicles often go the extra mile and own multiple pieces. Since the early 20th Century, luxury vehicle manufacturers have done everything necessary to build brand recognition, loyalty, and fanfare. Porsche, Lamborghini, Ferrari, and more recently, Tesla are examples of vehicle companies with loyal cult-like followings, and when these companies debut new products, there’s a high probability that these products achieve success and improve revenues and profits.

Directly investing in many of the traditional high-class vehicle brands is not easy. Tesla is one of the exceptions because of its age and product offerings. Most luxurious automobiles are produced by companies owned by larger businesses. Audi manufactures cars under the Volkswagen Group. Volkswagen also owns brands like Bentley, Lamborghini, and Bugatti. Some companies are owned by namesake companies like BMW under the BMW group. Luxury vehicle manufacturers' ownership changes more frequently than you might expect, giving fresh investors the opportunity to own valuable brands and assets under them.

The next great frontier in the luxury ecosystem is technology. Technology companies make huge returns by selling expensive versions of everyday products or introducing new services and products advertised as luxurious. Gamers spend incredible sums on gaming consoles and TVs with the most cutting-edge technologies to gain an edge over their competitors. Companies are selling luxury versions of household items with the newest technologies. Manufacturers of $10,000 refrigerators justify these prices by advertising the technological capabilities of everyday products. 

Digital assets and services can also be luxurious. Building a mining setup can cost millions of dollars for massive farms, but the smallest examples of such “farms” can cost thousands of dollars in energy costs monthly – making it something that only a few can afford. Good thing you do not need to set up a million-dollar mining facility to participate in crypto trading. With as little as your mobile phone, you can execute trades with some of the biggest players in the ecosystem.

The world of luxury accessories is immense, but a lot goes on behind the scenes to build brands and deliver the best products possible. Bags, shoes, watches, purses, and makeup are a few examples of seemingly ordinary products that command incredible prices in the retail space. Some products are sure investments due to scarcity, so if you’re lucky or rich enough to access certain products, you can almost always sell them for profit. 

Luxury watchmakers like Rolex, Vacheron Constantin, Audemars Piguet, and Patek Phillipe create incredible masterpieces that can cost millions of dollars on the open markets. The companies understand human psychology, allowing them to artificially create scarcity by producing fewer watches than they’re capable of and offering some products as limited-time or one-off offerings. If you can get your hands on shares in top luxury watch companies, expect to join a closed-off and fairly secretive space.

In a culture where fast fashion is the order of the day, luxury clothes makers offer a more sustainable and often pricier option. Suits from some of the top makers on Savile Row in London can cost thousands of dollars. Sometimes, money alone is not enough to access products from luxury clothing services. Some of these shops exclusively offer their products to royal families, politicians, and members of the ruling class.

Some expensive clothes manufacturers are fully booked for the next few years because their products are handmade by one person or a small group of people, meaning some gowns, suits, and coats can take months or years to complete. Size is one of the drivers of costs because customers understand the effort and time it takes to produce one authentic product, and luxury clothing producers are often smaller than accessory producers.

Most companies with “social capital” and cult-like followings built their brands over decades, which means they make decisions and take actions with long-term growth in mind. When you make investments in this space, expect to stay with the company for many years to watch your money grow.