“A Chanel handbag is a good investment.”
“I’m thinking of investing in a Kuvings slow-juicer.”
“It’s about time I take the plunge and invest in a Clarisonic to supplement my skincare regime.”
Earlier today I was asked if it would be wise to invest in a Rolex.
My first response to this question was probably a little rude.
But I did go on to say that buying a Rolex isn’t an investment at all. Except under extraordinary circumstances, buying a Rolex simply means you’ve sunk the money, and then it’s pretty much gone. If you ever decide to sell the watch, you’d very likely do so at a loss.
To invest in something, by definition, means to put money into a scheme, or venture, or “vehicle” of some sort, with the expectation of achieving a profit. Hence, a good investment would have some expectation of greater return.
Then how come it’s now common to hear that buying designer bags is an investment? Expensive electronics are investments. Signing up for a one-year premium gym membership is an investment.
“Investment” has become a word people use to justify expensive purchases.
Now, I’m not saying you should never buy a great (and expensive) food processor, never buy a classic, timeless (and expensive) watch, never for the love of God buy a premium leather handbag when a paper bag performs the same function!
We all have our needs and wants (note: I know I know, that series ground to a halt – sorry! I will get on Part 5 eventually) and that’s perfectly normal. If you want to buy an expensive “something”, then fine! Fair game! It’s your money after all, right? Just don’t lie to yourself and pretend it’s an “investment” when come on stop kidding yourself it’s not.
Misuse of the term “investment” perhaps started when people began to justify spending more money for quality goods.
After all, there’s this saying:
The poor man pays twice.
What this means is that if you buy something really cheap and shoddy – like a watch from the Dollar store or WW Mart – it’ll likely be crappy, badly made, and break after a few weeks. You get what you pay for, right? And so the poor man pays twice (and has to keep buying over and over again).
The corollary to this story is obviously it’s worth investing in better quality items, even if you have to pay the higher price tag at the start. The reason why it’s seen as an investment is because the money you put in at the start is expected to generate a return, in terms of the reliability and durability of the product.
So don’t buy dodgy, cheap-o tyres that might be a road safety hazard. And don’t buy a battery-operated blender from the fifty cent store.
It’s certainly wise to fork out a little bit of extra money and buy something of decent and reputable quality which you know will do the job well and last you more than a few weeks.
However, be careful. Because this process is subject to the very sexy thing called the Law of Diminishing Returns.
Cody Holt explains it with this cute little chart: (I’m not going to lie, I don’t know who Cody Holt is – I literally just found this pic while doing my usual Google Image search)
As the girl starts eating, her amount of enjoyment goes up and up and up. Until she reaches a point when she’s obviously getting full and sick of her food, upon which the Law of Diminishing Returns will kick in and her level of enjoyment starts to drop like a hot rock. Well personally I feel like the drop should be much steeper but who am I to argue with the chart-drawing skills of Cody Holt.
In terms of investing in good quality items, the Law also applies. Initially the more money you spend on an item, the more quality, durability, reliability you will get. But like the girl with the KFC Family Bucket all to herself, there will reach a point when more fried chicken does not equal more fun, and similarly more money does not equal more quality, durability, reliability.
In fact, after you reach this inflexion point (“the ideal”), and the line starts to bend downwards, you’re just throwing money into name-brands and prestige for the sake of owning shiny fancy Italian/Swiss/Exotic material goods.
A Kuvings slow-juicer could be an investment if you find yourself buying cold-pressed juices five times a week. It could be an investment if you think you’ll “generate the return” by saving more money making juice than you would buying it bottled from the store. But really think about it – will you really balik modal (break-even); will the savings you make pay for the machine itself? Or are you just going to claim to invest in a Kuvings but only hangat-hangat tahi ayam juice for two weeks before leaving it to rust in a cupboard under your sink.
Personally, I love leather goods. I think quality leather shoes are classic, look great, feel comfortable, and last a long time. And I’m willing to spend a little bit more money on them. But you have to exercise consumer discretion, and it’s important to ask yourself – am I paying for quality or the brand?
Because a lot of premium brands are smartypants with sales and marketing, and they’ll sell crappy, not-great-quality stuff for over-inflated price tags because they know they can get away with it, and people will buy! Because quality or no quality, the items are associated with a brand.
Overpriced Zara chiffon tops that only last five washes, I’m looking at you.
And you, plastic Ferragamo shoes.
Now let’s not get offended. I’m not anti-designer goods nor am I gluten free.
All I’m saying is that people need to stop kidding themselves: Ask yourself and know if you’re paying for quality or if you’re paying for a designer brand name. If you’re buying an LV Neverfull tote, you’re paying for waxed canvas – with leather straps. Unless you have a lot of extra money and pay for the actual leather line (which is far more expensive than the monogrammed canvas bags).
If you know it’s the brand you’re paying for, and you are aware of how much having the “brand” costs (not necessarily the quality – pls see law of diminishing returns), and you still choose to make the purchase – then that’s great, good for you, no judgment!
Just please don’t try make yourself feel better by calling it an investment.
(Because it’s not!)