wine investment

Alternative investments – how safe are they to invest money?

Potentially one of the best ways of making money over a long period of time is via investments.  Investments can be tricky and you should only use money that you can afford to lose. Economic downturns or troubled companies can destroy share prices and see their cash turn to dust. Of course, the rewards can also be great.

Traditional investments have been made in stocks, bonds or cash. The volatile economic climate experienced over the past few years has encouraged many investors to look at alternatives to the traditional three. There are many other places to invest your funds which are safer and still have the potential to deliver decent returns. These alternatives should compliment your existing portfolio and not replace it.

Many of the alternatives to the traditional investment portfolio require larger amounts of capital initially, and may be harder to convert to cash if needed quickly. The following are still well-worth a look:

Wine

Low yields and poor quality can affect the price of even the premier wines. This fluctuation can actually assist the investor. Several low quality years will bring a price down yet the product will eventually return to form and the wine you have invested in will gradually appreciate in value. A reasonable return on wine would be between 6% and 15% annually. One bottle will not be enough to make a significant return. You will need to purchase a large quantity of a type of wine you know will be of interest to a collector in the future. Bordeaux is an excellent choice – have a closer look at Mouton Rothschild – and if you stay on top of the wine market, you will find many more with excellent potential.

Managed Funds

A managed fund is run by one person or company who pools several people’s money. These funds are invested in a variety of different financial instruments. The funds are highly regulated and usually involve the prediction of how a certain product will do over time. In essence, the fund manager agrees to purchase a set amount of shares for a set price at a set time in the future.  At the point in time that the purchase is actually made, you hope the shares are worth more than the purchase price and a profit is made. Alternatively, the shares are worth less and a loss is made. This can be high risk and the market can be hard to predict as it is different to the normal stock market.

Venture Capital

Many companies starting up do not have the funds needed. They also often struggle to obtain these funds through the normal banking channels. A venture capitalist will finance all or part of a start up if they feel the company is worth it. When the company is ready to issue stock, the venture capitalist makes their money back and a profit. Sometimes the start up is purchased by another firm and a profit can be made this way. It is normally impossible to get the funds lent back during the first few years. It is also possible that the company will not do as well as hoped. This makes the initially funding risky and careful analysis is needed before you part with your cash. It’s not easy to make money with venture capital, but everything’s possible if you’re careful enough.

Real estate

Property has always been a fairly safe bet. Prices usually rise over time and the property does not usually fall down.  The economic crisis of 2008 did cause a lack of confidence in this type of investing but there are plenty of investors using this approach again. Property prices are still lower than pre the 2008 crisis and can make this an excellent time to purchase a rental property. The value of the house should rise to create a profit and it is possible to receive monthly rent payments at a higher rate than the monthly outgoings. This is a fairly safe investment technique but it is not possible to access your capital quickly.

In spite of a rather shaky financial time, there are sensible ways of making money with alternative investments. It’s all about making right choices at the right time.

What makes wine a worthwhile investment?

Not many people realize how valuable fine wine can be, although some are aware that really old bottles are indeed priceless. It’s quite incredible that a simple fruit like the grape can turn into such an exquisite beverage; but what makes wine turn into a profitable investment? Because only some bottles increase in value, and end up costing a few thousands. Wine is the result of fermented mashed grapes; its quality depends on several important factors, such as: vine age, climate, soil, vine genetics, and winemaker skill.
Each year, the weather changes thus bringing variation to final wine products classified as vintage wines. The genetics and soil never change; but as the vine matures, it yields less fruit; the flavor and aroma become much more intense, which means that the vintage has great chances of gaining tremendous value.

Fine wine – an exclusive beverage that can turn into a valuable investment
Major wine producing countries across Europe have attempted to qualify the notion of wine quality, so they finally chose to follow specific regions. Several regions and vineyards have been given historical meaning, so their quality factor is extremely high. The system permits wine experts to instantly recognize if a product is indeed worthy of becoming a valuable investment or not. France for example, is one of the world’s most notable wine regions. Its famous Bordeaux, Lafite Rothschild, Mouton Rothschild, Haute-Brion, and others, are now some of the most acclaimed and traded wine bottles in the world.

Price – ultimate indicator of quality
Price is usually the most important indicator of quality, although scarcity can make also the price increase at an insane pace. Investors must understand that not all wine types improve in quality and increase in price as they age. For that to happen, the aging potential of the wine has to be constantly monitored to determine the maturity level of the product. The checking has to be performed by experts who are compelled to taste the wine.

Investment grade wines are traded through auctions, and some of the world’s most notable auctions are in Chicago and London. Serious appraisers and wine collectors must know current retail pricing of popular wines, as well as the official results from the auctions to determine a wine’s value at that particular moment.

Fine wine – how much can a single bottle increase over time?
How valuable can a single bottle of wine become after a several years? Let’s have a closer look at a bottle of Chateaux Latour from 1961. When it was released, its buyer paid $3 for it. Right now, it sells at an auction for $500. Now the wine business can be incredibly tricky at times. For a certain type to become valuable it has to mature; the maximum period of maturation is 25 years. The wine we just presented is a lot older; it can’t be drunk and yet it is one of the most valuable in the world. In this case, we’re no longer talking about the quality of the wine, but about scarcity. In this case, a 1961 bottle of Chateaux Latour is a collectible.

“En primeur” wine – a risky but profitable type of investment
Wine “en primeur” is wine purchased by investors before the start of the bottling process. Simply put, you buy wine in advance at a cheaper price and you hope for it to be of excellent value. Much like fine art, wine has an inherent value – it can be drunk and enjoyed in case investors can’t make any serious money with it. At the beginning of the spring season, after vintage wines, the famous Bordeaux region of France produces young samples from the harvest of a previous year. The product is tasted and analyzed by international wine trade members, and afterwards released for sale. En primeur Bordeaux wine is exclusively traded through wine brokers, also known as “negociators”.
Investing in wine doesn’t have to be risky, as long as you make sensible decisions. If you’re new to the business, consult a wine merchant to help you out. Purchase wines with a proven background and track record, and stay away from people who sell “top quality” products directly. Wines that are profitable are only traded through reputable auctions.

Investing in collectibles: How it came into existence?

Collectibles such as comic books, stamps, art, classic cars and vintage wine don’t have a quantifiable fundamental value. Sure, they offer a lot of enjoyment to collectors but only a fraction of them are considered valuable investments. When buying collectibles with the sole purpose of selling them for money, you must find someone who will want to pay more just to own it. What drives people to collect things, and where did it all start?

Tulip mania and people’s obsession with collecting tulips

Believe it or not, 4 centuries ago you couldn’t find tulips everywhere like today. In the 17th century, during the Dutch Golden Age, the price for tulips grew incredibly and some people would pay exorbitant amounts of cash just to own a certain variety or type of flower. Tulip mania was an absurd type of collectible that attracted Dutch traders obsessed with flowers in general. The trend faded pretty quickly due to malfunctioning markets, behavioral biases and basic economic concepts such as supply/demand irregularities.

The history of collecting things

They say “collecting things” is an ever-present human activity scattered through centuries-old civilizations. Historians have always been intrigued by antiques mainly because they bear a fascinating past. Collecting is a very old cultural practice that emerged during the Egyptian Ptolemaic Dynasty when the Library of Alexandria started gathering books from all over the world.

In Renaissance Florence, the Medici family started collecting art via private patronage, thus freeing artists from the debts they had. Nowadays, many international museums (such as the Metropolitan Museum in NYC, Franz Mayer in Mexico, Thyssen in Madrid) hold priceless art pieces donated by generous collectors who wanted for the whole world to admire their collectibles. We’re talking here about emotional collectibles with great value, but that are not for sale.

Collecting prints and engravings by people who couldn’t buy original art is another centuries-old hobby. In the 18th century, in Paris, the habit of collecting curiosity items related art expanded quickly in England as well. Ever since, the modern art markets of London and Paris have gained a reputation for being well documented.

New categories of antiques and vintages emerged in the 20th century when people started collecting jewelry, china, stamps, clocks, political memorabilia, wine and cars. Right now, a lot of items that are old (20, 50, 100 years old) are considered antiques. However, this doesn’t mean it’s easy to find someone interested in buying them from you.

Are all collectibles considered valuable assets?

No. The collectible market is faddish, illiquid and opaque. Selling art pieces is now tougher than ever from various reasons. First of all, replicating art is extremely easy “thanks” to advanced technology; second, finding an avid collector to buy what you’re selling is another difficult job. You have to participate in numerous auctions, as well as have your item checked over and over again for authenticity.

Fine wine as a collectible

Is fine wine a valuable collectible? First of all, we must emphasize that wine is a consumable asset. It’s a bit complex to buy fine wine as it demands a lot of patience. Proper storage conditions and good quality wine from reputable vineyards are essential steps to consider before starting spending money. There’s a golden rule to wine investments – invest if you genuinely like the product and your chances of success are greatly enhanced. Let’s not forget that most collectibles are emotional assets, things that people like and appreciate.

However, if you can afford to buy fine wine from auctions to sell afterwards, then by all means, do it. Many wine collectors are not drinkers, and they trade wine for pure financial purposes. This category of investors are extremely rational; they know the market and they’re experts at assessing which wine may increase in value and which will decrease.

The history of investing in collectibles is long and complex, even peculiar. Nonetheless, it’s certainly worth exploring. Starting with Tulip mania in the early 17th century and ending with art, stamps, wine and classic cars in the 20th century, we must admit that vintages have tremendous value, whether it’s emotional or financial. Before investing in wine, or in any other form of collectible, you are advised to deal with a reputable merchant in order to be sure what you’re buying is 100% legit.