“Great is the fortune of him who has a good bottle, a good book and a good friend.” – Moliere
When they think of wine, most people imagine a meal shared with friends and family enjoying a good bottle of Cabernet Sauvignon. But with its culinary attributes, wine can also be a profitable investment.
How does investing in wines compare to other investments?
Many people focus on traditional financial asset classes like stocks and bonds when it comes to investing. Other people invest in real estate or businesses. But fewer people are considering investing in alternative assets such as wine.
Physical assets, if properly researched before purchase and stored in good conditions, have the potential to appreciate over time. They can be useful for diversifying your portfolio.
When comparing investment in wine to other investments, wine, as a physical asset, is subject to the same risks as other physical assets. For example, if you live in an earthquake-prone area like California, you’ll need to make sure your wines are protected in the event of an earthquake.
Even with the storage risks, wine has generated substantial returns over the past few decades. Many wines are traded on the London International Vintners Exchange (Liv-Ex), a fine wine exchange market. Over the past five years, the Liv-Ex Fine Wine 1000 has averaged an 8.3% return. This performance is slightly lower than the S&P 500 and the Dow Jones Industrial Average over the past five years, although wine performance has been higher over a 20-year period.
Choosing wines to invest in
For many people, investing in wine is a way to put their money into something they enjoy and can consume. It can be a fun and interesting hobby, as well as a smart investment. If you’re thinking about getting into wine investing and building your wine collection, here’s what you need to know.
The first thing to understand is that you can buy two basic types of wine: table wine and investment wine. Table wine is made to be consumed a few years after bottling. Investment wine, on the other hand, is made to be cellared and kept for many years. It can increase in value over time, making it a valuable asset.
If you are interested in investing in wine, you will need to buy investment grade wines. These are generally more expensive than table wines, but have the potential to increase in value significantly over time. When choosing an investment wine, consider factors such as the grape variety of the wine, its region of origin and the producer. You can choose from over 200 types of wine.
When it comes to selling your wine, you will want to wait for it to reach its maximum value. This goal may take many years, so you will need to be patient. It’s also important to work with a reputable wine merchant who specializes in investment-grade wines. They can help you determine when your wine is ready to sell and get you the best possible price.
What characteristics influence the price of wine
Wine is generally classified according to its region of origin, its grape variety, its style and its quality.
The most common types of wine are red wine, white wine, sparkling wine, and dessert wine.
Red wine is made from red or black grapes and can be dry or sweet. White wine is made from white grapes and can also be dry or sweet. Sparkling wine is made by adding carbon dioxide to wine, which gives it its characteristic fizz. Dessert wine is a sweeter type of wine.
How is wine classified?
Wine quality is usually rated on an A to C scale, with A being the highest quality and C being the lowest quality. The wine grading system can vary depending on the country of origin, but generally higher quality wines will be made from better grapes and will age longer.
What are the main characteristics of a wine that will be appreciated?
The main characteristics of a wine likely to be appreciated are its age, its condition and its provenance. In general, older wines, especially those that have been well cared for, will have more value than younger wines. Additionally, wines from well-known or award-winning producers are also likely to appreciate in value. Finally, wines that have been stored in ideal conditions are also more likely to be appreciated than those that have not.
How can you start investing in wine?
Consider these options if you want to invest in wine.
Buy and store bottles
The easiest way to start investing in wine is to go to the store and buy some. Then, store the wine properly and track its price in online wine markets to determine when you’re ready to sell it.
Another option is to buy wine at an auction. The fact that the wine is at an auction means that the auction house has already determined a demand for that bottle of wine. You need to do your research beforehand to make sure you don’t get caught up in a bidding war and end up paying too much for the bottle.
If you have limited funds, are just starting out, or want more diversity in your wine portfolio, you can also invest in fractional bottles. Companies like Wine specialize in these types of investments.
Securitized wine investments
Buying wine through a wine investment fund is one of the most popular ways to invest in wine. Wine investment funds offer several benefits, including professional storage and management of your wines as well as the ability to diversify your investment across many different wines.
However, wine investment funds can be expensive and there is no guarantee that you will make a profit on your investment. You should also check the fund’s expense ratios, as administration fees will reduce your potential returns. Like other funds, you trust the expertise of fund managers, but for wine funds, experts choose bottles of wine over stocks and bonds.
If you want to invest in wine but don’t want to go through a wine investment fund, there are a few other options available to you.
You can invest in wine through wine-related stocks or an exchange-traded fund (ETF), which is a type of investment fund that tracks a group of wine companies and trades on an exchange like an action. Wine ETFs offer the opportunity to invest in wine without the need to buy and store the bottles yourself.
You can invest in wine futures, which are contracts to buy wine at a fixed price at a future date. Wine futures can be a risky investment because the price of wine can be volatile and you may not be able to find a buyer for your contract at the price you have agreed.
Another option is to invest directly in wine producers by buying shares in the company. It can be a risky investment, as the company’s success depends on a number of factors, including the quality of its wines, the expertise of its management team, and the overall health of the global wine market. Local grape growers also face local weather risks and may experience poor harvests.
Whichever option you choose, it’s important to do your research and understand the risks before investing in wine.
Other Considerations When Investing in Wines
Investing in wine can be a risky proposition as the price of wine can be volatile and you may not be able to find a buyer for your contract at the price you have agreed. If you are in physical possession of the wine, you will also need to consider delivery costs when calculating your potential return. If you don’t have the space (or inclination) to store your wines at home, there are also wine storage companies that specialize in keeping your wine safe at ideal temperatures.
Wine investment funds eliminate many of the inconveniences of owning wine yourself, but convenience often comes at a steep price. Wine investment funds often charge more than 1% in management fees, which is significantly more than stock index funds.
If you are considering investing in a specific winery or distributor, you should keep in mind that their success can vary significantly each year due to weather conditions and public opinion. Consumer tastes change frequently, especially when it comes to trendy beverages, which can affect the ROI of your wines. If you choose to take this route to enter the wine market, you should be prepared for considerable variations in your returns.
Investing in wine can be a fun and rewarding experience. However, it is important to understand the risks involved and take the time to learn about the wine market before making any purchases. With a little research and patience, you can find great wines that have the potential to increase in value over time.