The Impact Of State Regulations
If you live in a state that doesn’t allow purchasing wine over the internet, directly through a winery or through a retailer who isn’t required to purchase wine through a wholesaler, you are limited in the selections of wines you can purchase for your collection based on what your region’s wholesalers choose to carry. Before you decide to start a collection, find out what restrictions in availability exist in your state.
Is Wine Investing For You
The choice to invest in wine will depend on your goals. Wine investing is a great way to boost your portfolios growth and limit overall risk. Its also an excellent option to consider when diversifying your portfolio, as it can help minimize volatility.
Wine investing could make sense for people who love wine and are interested in adding it to their portfolio. However, its also a risky investment if you havent yet established a plan to meet your retirement goals.
Generally, experts suggest that investors limit their exposure by ensuring non-core assets make up less than 20% of their total portfolio.
Why Invest In Wine
The fine wine market has outperformed all the major global equity markets over the past 15 years, delivering double digit growth, and today is classified less volatile than real estate or gold. Putting together a portfolio of the best wines for capital growth is currently a very profitable alternative for a growing number of investors from all over the world. Through our memberships of the most respected wine exchanges globally our aim is to offer you greater efficiency and liquidity in this increasingly mainstream market.
The history, source, authenticity, storage conditions, and insurance are the most important things to consider when investing in wine. Next is the research, performance and knowing how to pair which regions and vintages together to achieve maximum potential. Doing all of this yourself is something we strongly advise against as a very risky exercise. The logistics required for fulfilment, coupled with the necessary knowledge and expert relationships, you are better served letting us and our expert team build you a fabulous portfolio of fine wine without all the hassle.
Let us select, acquire, store and insure your portfolio, knowing that when the time comes to sell you will be doing so with an unrivalled network of liquidity which also comes with an industry first buy back policy covering the first year on all your investments.
Low Volatility
Our international network stores your wines in state-of-the-art facilities in perfect condition.
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So Which Are The Best Choices If You Are Thinking About Investment In Wine
The biggest regions for investing in wine are the Bordeaux and Burgundy. The top vineyards in these areas make a limited number of fine wines that are aimed at the collector. Because theres only a limited amount, as the supply dwindles, the price goes up. The price also rises as the wine begins to age. The best performers historically have been the top 30 or so Bordeaux chateaux and this is still the best place to start if you are starting to build a cellar. According the Liv-ex Fine Wine 100 Index, some of the top wines for investment in the current market are:
Fine Wine Resilient To Market Swings
Despite ongoing intense market volatility and a very uncertain future, many investors are clinging to their stocks and hoping for the best. What you might not know is that many of the biggest names in investment are turning to a little-known investment with huge potential and very low correlation to the stock market. Top investment advisers recommend that investors diversify part of their portfolio with resilient alternative assets such as fine wine.
In March 2020, right at the start of the global pandemic, the S& P 500 plunged 25 pc. In the same month the Liv-ex 1000, the fine wine index that tracks the prices of 1,000 top-performing bottles, slipped just 4 pc. We see the same pattern if we jump back to the recession of 2007-2008 when the S& P 500 plunged 38.5 pc. In contrast, the Liv-ex 1000 dipped by just 0.6 pc.
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Investing In A Wine Fund
Since they are partially regulated, investing in wine funds is generally considered less risky than investing as an individual. However, such funds can require a larger financial commitment and a lot more patience its not up to you when you can cash in your investment. Its also important to note that there have been some bad operators in this field too so as with all forms of investment, it is incredibly important to do diligent research on the particular wine fund and its managers. Luckily, a few excellent websites exist to help you limit your risk and maximise your knowledge. For price checking you can use www.wine-searcher.com and for due diligence we recommend www.investdrinks.com.
Why Should I Invest In Wine
- The addition of an asset to ones investment portfolio is an important diversification which mitigates risk and reduces levels of volatility. Wine has a low correlation to traditional-market investments
- Physical assets are often perceived as offering a stable store of value in uncertain times. Stock markets can crash, businesses can close, and share prices can collapse â but tangible assets do not cease to exist . In this sense, fine wine can be compared to real estate, but without maintenance costs, and without being reliant on a single economy. Fine wine can also be moved around and traded internationally.
- Fine wine investments have traditionally held their value in times of economic downturn. During the financial crisis of 2008, the Financial times designated the market for fine wine a “a haven for investors in difficult times’
- Returns on fine wine show a more then healthy average of 13% per annum. Live-ex 100 returns have surpassed S& P 500 over the past 20 years.
- Over the past 10 years, fine wine has outperformed all other ‘luxury treasure assets’ such as cars, fine art, diamonds & gold. Furthermore, no other asset came close in terms of performance, ease of access, ownership costs and transaction costs
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Investing In Wine Every Year
I continued to invest every year, gradually increasing the amount, partly as prices were increasing in the market and partly as I got more interested.
The next excellent year was 2005, and again I invested heavily around £100,000. My investment by then was approaching £1m.
In 2009 and 2010 the market became overheated. There were too many investors, the prices were pushed too high, the chateaux got a bit too greedy and en primeur was sold at too high a price. I got caught up in the hype and invested £500,000 in 2009 and another £500,000 in 2010.
The market collapsed in 2011. The Liv-ex 100, which monitors the market, showed a drop of 30%. I didnt lose out financially because I hung on to the wine. I just sat on it.
Lvmh Mot Hennessy Louis Vuitton
The sprawling luxury goods portfolio of France’s LVMH Moët Hennessy Louis Vuitton has produced one of the world’s richest people: CEO Bernard Arnault. Champagne and other ultra-high-end spirits feature prominently in this diverse portfolio of high fashion. The company’s name indicates as much since champagne house Moët & Chandon is a premier beverage of the rich and famous, as well as a highly sought-after label for special occasions. Other premium champagne brands include Dom Pérignon, Krug, and Veuve Clicquot.
LVMH’s champagne and distilled goods segment reported a 15% decline in sales during the COVID-19 pandemic in 2020. But champagne is bubbling back to life as the global economy finds its footing once again. Champagne represents less than 20% of LVMH’s total business. Even so, the luxury conglomerate overall is a long-term growth stock, and its collection of high-end products is in consistently high demand. In emerging markets such as China, ultra-high-end goods are growing at a rapid pace. Shares also pay a small dividend. For investors looking for steady growth from the epitome of grape-based alcoholic beverage luxury, look no further than LVMH Moët Hennessy Louis Vuitton.
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Follow Demand And Know The Market
In the long run, buy wines that you know you can resell. You want to base your collection on wines that are in demand year-in and year-out.
The Chinese, for example, love Bordeaux and Burgundy. As a result the prices are much more stable than for other wines.
You wouldnt want to build a collection of wines from Spain, Argentina and the US, but you could take a punt.
I follow Spanish wine producer Alvaro Palacios. If you had bought his wines a few years ago you would now be making good returns because his wines have received accolades. The prices have doubled and tripled in some cases.
Storing Your Wine Collection: Protocols & Costs
If you want your wine to age properly and achieve its maximum potential, both in terms of taste and value, you need to store it in carefully controlled conditions. This controlled storage is commonly referred to as cellaring. There are two principal ways to cellar wine: building a customized storage cellar on your property, or using a reputable public facility, whether independent or affiliated with an online wine exchange.
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Why You Should Invest In Cheap Wine
Picture this: youre sitting at your best friends kitchen counter. She is talking up a new local wine she discovered and wants to see if you can identify it in a blind taste-test. Shes going to pour you her cheap everyday wine and the new Chardonnay . Which one tastes like a better wine, she asks? A pricier wine? You, surprising even yourself, choose the cheap wine.
Fear not. Studies show youre not alone. Brian Palmers recent piece on Slate, Drink Cheap Wine, confirmed this fact. Its happened over and over: most people simply cant reliably identify finer or more expensive wines in a blind taste test.
Palmers point is simply that Americans spend too much on wine. Somehow, our notion of an inexpensive, everyday bottle of wine has inflated to roughly $15 when other countries drink more wine but actually spend far, far less on it. For example, Europeans drink 3-to-6 times more than Americans, but only the most affluent would spend 11 euros to drink a bottle of wine at home on a Wednesday night, Palmer notes. Its just not done. And Germans pay, on average, $1.79 for a bottle of wine.
In trying to get to the bottom of why we feel like we equate a higher dollar amount to a finer bottle of wine, Palmer says its time to just let it go. Most everyone else has: If wine critics want to spend lavishly on the wine they like, thats great. Leave them to their fun. Be grateful that you can gain just as much pleasure, if not more, without bankrupting yourself.
How To Buy Wine As An Investment
Wine is sold both in the primary and secondary market. In the primary market, wine typically moves from producer to consumer through wholesale distributors who sell the wine to retailers.
The secondary market is where most collectors and investors purchase wine. In this market, collectors, oenophiles and investors sell wine through auction houses, exchanges and wine brokers.
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Buying Bottles And Storing
The traditional way to invest in wine is to do the research, buy physical bottles of wine, and keep it stored until they go up in value. As you can imagine, this is not an easy option for most people to do as it requires some knowledge, money, and effort to properly buy and store wine bottles.
Here are the challenges:
- It requires research and knowledge
- Can require a much larger investment to get started
- Know where and how to buy the right wines
- How you are going to store the wines
- Knowing when and where to sell your wines
Reading And Learning About Wine
I used the software CellarTracker that analyses the wine market.
When the en primeur season started, usually in March/April, I would go through the list of wines that the wine expert Robert Parker scores. I ensured anything that scored 95 or better was on my radar because I knew it would have reselling value.
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Build Your Wine Portfolio
The rise of digital platforms and wine exchanges has democratized the wine market and made it more transparent. This has increased the number of investors interested in investing in wine.
Wine can be an alternative asset class that can add value to your portfolio. However, before you start, make sure that you have a long-term investment strategy in place. When deciding to invest in a good vintage, bear in mind that it is a long-term commitment.
Storing It On Your Own
The biggest advantage of storing your wine on your own property is being able to access it whenever you please. However, to age properly, wine needs a cool, relatively moist environment. The ideal is 55 degrees Fahrenheit and about 60% relative humidity . While that might sound like the lowest level of your house, its never a good idea to store investment-grade wine in an unfinished basement. The risk of mold, moisture, and temperature damage is simply too great.
Instead, invest in an airtight, climate-controlled wine cellar capable of holding several hundred bottles. Costs vary widely: Wine cooling units cost at least $1,000 and range up to about $10,000. Airtight doors cost $1,000 to $4,000, racks cost $2 to $15 per bottle, and flooring costs at least $5 per square foot.
If your cellar isnt attached to your house, you may also need a security alarm and motion-sensing lights .
Finally, any sizable wine collection needs specialized wine collection insurance to protect it against fire, flood, earthquake, shipping damage, certain natural disasters, and other perils. Coverage costs typically start at $0.40 per year, per $100 of wine, but can exceed $1 per year, per $100 of wine, depending on factors such as security and your homes vulnerability to natural perils.
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Understand A Wines Aging Potential & Longevity
Aging potential is critical for fine wine because some wines age better than others. Factors that can influence the potential to age well include the type of grape and level of acid and tannins. You can also look at a producers track record of creating wines that age well.
Longevity varies among wines. Investment-grade wines tend to mature around 10 years after bottling, but some wines can age for extended periods, appreciating in value and quality all the while. Others will only be drinkable for a shorter period after fully mature.
Invest Through A Dedicated Platform
Another avenue to use for investments is using a dedicated platform that lets you invest in bottles of wine. Many platforms like Vinovest allow users to buy and sell wine. The main advantage of platforms like these is that they have experts on hand to offer advice on the best wines to purchase.
Specialized wine investment platforms allow you to acquire decent wine investment portfolios in one place for an affordable sum of money. There is also no need to store the wine yourself.
With these sites, you will probably be charged a commission, and you will not have the freedom to select your vintage. If you would rather have a wine expert make the investment selections for you, you should consider joining a wine investment platform.
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What Influences The Price Of Wine
The top drivers of value for investment-grade wines are vintage quality, provenance, rarity and ability to age.8 Importantly, the inherently finite nature of the supply sets wine apart from most other commodities. Unlike gold or silver, wines are made unique by their location and year of production, and, once consumed, they cannot be replaced.
Even with powerful wine brands, scarcity can drive prices higher. As an example, in 2012, Domaine de la Romanée Conti in Burgundy produced fewer than 4,500 bottles, which now sell for upwards of $13,000 per bottle by comparison, First Growth Lafite from Bordeaux reliably produces 15,000 to 20,000 bottles per year, which sell for closer to $500 per bottle.9
How You Can Easily Invest In Wine Today
This post is sponsored by Vinovest. All opinions are my own.
Whether the stock market is currently experiencing volatility or not, a great way to diversify your wealth and investment portfolio is through alternative investments.
Although alternatives have grown in popularity, these options have also become much more accessible for investors to diversify their portfolios than ever before.
Mostly due to financial regulations changing and technology companies looking to shake up the industry.
While investing in stocks and bonds is still a smart decision, building a diversified portfolio will protect you against wild market swings and improve your wealth.
One interesting alternative that is growing in popularity is investing in wine.
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How To Buy Wines For Investing
In recent decades, the wine market has become vastly more accessible. The establishment of the London Vintners Exchange , a global platform for wine trading and indexing, has led to more transparent pricing and information. However, since direct trading on the Liv-ex is only available to professional wine merchants, most private investors purchase their wines directly through distributors, auction houses or the secondary market via fine wine retailers. Savvy investors may also be able to leverage arbitrage opportunities between the three largest markets, New York, Hong Kong and London, in order to lower prices and tax load.13
Another method is to buy wines en primeur, or through wine futures, which allow you to invest in wine while it is still in the barrel. You can purchase such futures up to 18 months before the official release of a vintage. However, note that the value of the wine isnt guaranteed and may actually decline between the time of purchase and time of sale.14
