Hey you! Yes, you there, squinting into the screen and searching for meaning. Since you’re here, may we pay you a compliment? Ok, here goes; like a fine wine, you just seem to get better with age. But what if that compliment could, well, pay you?
In recent years, discussion of fine wine has moved from the mouths of sommeliers, claret connoisseurs and part time plonkers and into the vernacular of the serious investor, regardless of the latter’s grasp of bouquet, grape and noble rot.
Though you may be conservant in the terminology, the process of investing in fine wine can be complex. Whilst not everyone has a nose for quality wine, if you’re able to sniff out a good deal, then this could be for you.
The scarcity and quality of fine wine will appreciate as time passes, and so will its value. As such, it is possible to purchase wine bottles, store them, and then sell them for a higher price in the future. Of course, it’s not that simple, but if you’re wondering whether fine wine is a worthwhile investment, then here are 5 beginner’s tips.
TYPES OF FINE WINE INVESTMENT
Fine wine investment isn’t restricted to simply buying a few more expensive bottles, stashing them in the back of a cupboard and hoping for the best a few years down the line. In fact, that would be one of the more limiting approaches in this increasingly lucrative field.
There are several fine wine investment opportunities available, depending on your budget, level of commitment, and knowledge of both wine and, perhaps more importantly, investing. For example, investors can choose from wine-specific investment funds, stock exchanges, storage solutions for aging bottles, and more, all in the name of generating a pretty profit.
There are also plenty of options when it comes to buying and selling assets. The most popular for more small-time, hobbyist investors is the gradual building of an investment portfolio of fine wines which are most likely to accrue value over time and are, also, the least risky to store over the necessary, extended period of time without depreciating in quality and value.
If all of that sounds a little complicated and you’re purely in this thing for the money, then there is a simpler solution, too. A person can rely on a wine investment company for purchasing the wine and storing it on their behalf. This helps individuals invest in wine without having to deal with the headaches and hangovers related to constructing a wine cellar.
STORAGE SMARTS
Storing fine wine correctly, in the hope of it appreciating value over time, is one of the key elements of successful fine wine investment. In some situations, a person does not even have to possess the bottle of wine purchased to gain its accrued value. Instead, they can have them stored in specialist facilities for as long as they need, for a price, of course. This ensures the wines remain safe and in pristine condition until a profit can be made. Alternatively, if someone is not interested in collecting and storing wine, they can consider making an investment in blue-chip wine stocks and funds, which is another viable market.
But on the more hobbyist side of things, investing in proper wine storage is absolutely essential to ensure the value of bottles appreciates rather than depreciates, and is integral to any fine wine investment actually being financially viable. Fortunately, we’ve got just the article to help you with that; check out these 5 IDEAL tips for storing your wine to guarantee longevity.
BENEFITS OF INVESTING IN WINE
Making moves into the world of fine wine can be a profitable investment option, whether it’s a simple, singular transaction or a way of further diversifying a large, varied portfolio.
When considering the benefits of investing in wine, it should be noted that fine wine has a low correlation with a stock market currently performing somewhat lethargically.
Reports show that the fine wine market has outperformed most exchange-traded funds and global equities in these increasingly volatile times. According to the guys at Finance and Toast, the Liv-ex Fine Wine index, ‘’which tracks the daily price movement of the most heavily traded commodities in the fine wine market’’ showed wine seriously outperforming more traditional forms of investment.
They say ‘’the MSCI World Index fell by over 23% in March, but some of the fine wines had double-digit percentage gains in price…clearly showing that luxury consumables are resistant to the broader volatile markets’’. Food, or rather, drink for thought, indeed.
It’s this sense of stability which should appeal to new investors, particularly when gold and real estate are currently so unpredictable. In fact, at the end of last year, the Telegraph reported that fine wine had surged 200% in the last decade, with its price particularly resistant to the market swings of a global pandemic and Brexit.
RISKS OF FINE WINE INVESTMENT
So, why wouldn’t you invest? Well, as with any investment in a perishable product, there are some pretty big risks here. Perhaps the largest concerns the risk of fraud, which is rife in the upper echelons of the fine wine world.
A particularly high profile case involving the relabelling of basic bottles with highly sought after vintages garnered widespread media attention in 2016; there’s even been a Netflix documentary, Sour Grapes, about the protagonist Rudy Kurniawan, who amassed a fortune, selling $24.7 million worth of wine at a single auction in 2006. Though this is an extreme example, scams of a similar nature aren’t particularly rare in the fine wine investment game, and do represent a risk.
It should also be noted that short term gains are very rare. Anyone hoping to make profit from fine wine investment needs to be playing the long game. Since wine doesn’t actually produce any returns whilst it’s in storage (and storing and insuring your bottles will cost you), you’ll only see financial gains when you sell your bottle. As such, you need a fair amount of capital and patience to make this thing a success.
UNDERSTANDING INVESTMENT-GRADE WINE
Fine wine that’s considered a particularly worthwhile investment is referred to as ‘investment grade wine’, and it’s sensible to develop an understanding of what classifies as investment grade before you start expanding your portfolio. Though so-called New World wines can accrue some value over time, it’s miniscule when compared to investment grade varieties.
In fact, this category is dominated by classic French wines, especially 1885 classification Bordeaux reds, Grand Cru Burgundy, and Rhone Valley wines, as well as Italy’s ‘Super Tuscan’ wines, and a few Californian Cabernet Sauvignon varieties.
THE BOTTOM LINE
Once the preserve of wealthy elites, fine wine investment now represents a savvy, stable financial move in a market so volatile and unpredictable. Cheers to that!