Wine investment is part of a growing trend of investing in alternative assets. Traditional investors historically focus on bond investing and dividend investing. Today, these same investors are considering art investing, coin collecting and for those with the risk tolerance, cryptocurrency trading. With a world focused on enjoying itself as a priority, investing in something which you can also derive pleasure from has huge appeal.
Key Takeaways
What is wine investment?
Why the value grows organically
How to get started!
What does wine investment consist of?
Wine investment consists of different strategies, all of which take time to play out. It can take 10-20 years for wine to give you a return. Although you can trade between different vintages, this is time consuming. Many prefer the longer-term approach. This consists of buying and holding wine to benefit from the increase in value that happens with time. As wine matures, it taste improves, creating value. Some wines mature faster than others, so you return will be faster, although not as great as if you invest in slower maturing wine.
This does introduce some costs and risks though. You have to pay to store the wine and a cool and dark place. For those who keep their collection at home, this often leads to wine being stored in cellars below ground, where there is always the risk of flooding. This introduces another cost which you may want to consider: insurance.
Is investing in wine a good investment?
It must be if professional investors are doing so. After all a good vintage will each year increase in value as wine owners consume, and therefore reduce the available bottles, of that year’s vintage. This means that investors who are prepared to buy and holdwill automatically see the value of their holding rise over time. The appreciation in value is usually slow though.
What is is the best wine to invest in?
Even the less knowledgeable will be aware that a ‘good Bordeaux’ has value.
Old favourites will always be in demand. An example is a Bordeaux wine. Bordeaux wines have centuries of prices to compare against, and they also have exclusivity. This exclusivity comes from the parcels of land on which the grapes are grown being non-expandable. This reduces the supply available to the market and therefore increases its price. Be careful to monitor market trends though. This will require some time investment on your part. Every decade or so, the preference of wine drinkers changes. You may therefore want to ensure that your wine investment collection has different types of wines and vintages in it.
You may also be able to discover a new vineyard who wine is not appreciated by the mass market. Although its lack of history will count against it, today’s consumerism and superficially focused world means it could become an overnight sensation with the right marketing.
How do I get started?
Start by drinking wine! There is nothing like getting involved, so buy a bottle a week and taste it to built up your pallet. This will also get you familiar with the names, bottle shapes, the tendencies of countries and regions. In turn this will allow you to understand why some wines are more expensive than others.
Although an excellent taste may be the ultimate variable in valuing a wine, the price of a wine can also be related to supply. Or maybe a bad couple of years for the competition. You will only be able to understand this with experience.
Other advantages of wine investing
Some countries do not tax on profits from the sale of wines. In the UK, HMRC considers wine to be a Wasting Asset. This means it has a predictable lifespan of less than 50 years and makes it exempt from tax. Countries may have different rules in this area so it is worth checking first.
Wine is a tangible asset, which means you can touch it. With today’s reliance on technology, holding some assets in physical form may not be a bad idea, especially one you can easily (in very small quantities) carry around!
Wine investing returns are not correlated to other assets such as cryptocurrencies or the stock market. This gives your overall wealth a source of diversification.
Conclusion
Wine investing is not a source of quick money. It will take time to develop your knowledge and patience to allow your wine cellar to increase in value.
Investing in winewill also require investment in the wine itself and the facilities to hold it. This means the cost of doing so will come form your own pocket and not from the investment. This is something to be aware of when you start!
Yet if you are prepared to put the effort in, you will be able to be rewarded over time with wealth creation as well as being rewarded with a good glass of wine when you want!
Louis is a portfolio manager and a trader who brings a wealth of experience in private banking to The Lazy Trader. A fundamentalist and a trouble-shooter, Louis makes a firm contribution to the trading team.
Louis is a portfolio manager and a trader who brings a wealth of experience in private banking to The Lazy Trader. A fundamentalist and a trouble-shooter, Louis makes a firm contribution to the trading team.
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Wine investment consists of different strategies, all of which take time to play out. It can take 10-20 years for wine to give you a return. Although you can trade between different vintages, this is time consuming. Many prefer the longer-term approach. This consists of buying and holding wine to benefit from the increase in value that happens with time. As wine matures, it taste improves, creating value. Some wines mature faster than others, so you return will be faster, although not as great as if you invest in slower maturing wine.
Old favourites will always be in demand. An example is a Bordeaux wine. Bordeaux wines have centuries of prices to compare against, and they also have exclusivity. This exclusivity comes from the parcels of land on which the grapes are grown being non-expandable. This reduces the supply available to the market and therefore increases its price. Be careful to monitor market trends though. This will require some time investment on your part. Every decade or so, the preference of wine drinkers changes. You may therefore want to ensure that your wine investment collection has different types of wines and vintages in it.
