In our Global Compounders Portfolio, we own Hermes, a 180yr old French luxury brand known for its Birkin bags, a symbol of wealth and exclusivity due to its high price (starts at $10k going all the way upto $400k) and long waiting lists. Demand for luxury goods is not just steady but growing, especially amongst the rich millennials. Yet, we all know of that someone who like many of us aspired for luxury brands in our youth, only to give up on them just when they could afford. Christine Benz of Morningstar is one such who has redefined the meaning of luxury, articulated beautifully in this blog.
“My definition of luxury has changed over the past few decades. With plentiful funds to cover the purchase (and even without!), my 30-year-old self wouldn’t have blinked; she’d have gone with the Chanel and basked in the admiring looks. But as I’ve grown up and have more funds at my disposal, a funny thing has happened. I’m much less inclined to want or need to show what I have than was the case when I had much less. My “luxury goods” today are much more in the category of things that make me feel good inside rather than looking good on the outside. And they’re not “things” at all…. over the years, many financially “well” people have shared variations of the same sentiment. Their need for outward shows of success has been inversely correlated with their net worths.”
She goes on to highlight six ‘luxury goods’. We feature two of them here:
“Luxury Good 1: Putting Money in Its Place
The biggest luxury of being financially well, I’ve realized, is making sure that money doesn’t have an outsize influence in any of the major decisions I might make and, most of all, that it doesn’t cause stress. Has the price on flights for our upcoming overseas trip shot up since we first looked at them? Not ideal, but let’s stick with our plan. If my husband or I decided we didn’t want to continue working in our current jobs for whatever reason, we could hang it up without running any numbers; no salary is worth dreading the alarm clock. Most of all, I can’t envision a financial catastrophe that would be large enough to derail our security and our plans. The peace of mind that accompanies having money in the bank and in our investment accounts isn’t a conventional luxury good, but it’s one that I treasure more than I ever could a head-turning car or a logo-ed tote bag.
Luxury Good 6: Being Able to Help
Finally—and I’ve written about this before—one of my very favorite luxury goods has been being able to extend financial help to people in our orbit when they’ve needed it. This relates to my previous point about having cash at the ready. We give to charity, too. But there is nothing more gratifying than to be able to say “I can help with that” after hearing a friend or family member discuss their struggles with money, whether it’s a pet’s surgery, a car repair, or a late rent payment. I’m smart enough to know that life isn’t always fair, and I’ve been lucky in many ways—not least that I have a financially responsible life partner who knows that he’s been lucky, too. There was a point in our lives when we didn’t have funds to spare, and we remember it. At this life stage, helping people close to me will forever and always be my favorite luxury good.”
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