Wine investment is different to many hobbies; most do not result in an increase in your financial well-being. Wine is often seen as something which is bought to be enjoyed. Certainly it is possible to sell a few bottles here and there but a cellar full of normal quality wine will not reap any significant financial rewards. However, if you purchase investment quality wines, of which there are only approximately 75 varieties, then there can be a significant financial gain.
Know your wine
Approximately 80% of the fine wine market is made up by the Bordeaux’s. These wines have been trading strongly for many years with a steady upward trend in their prices. As with any wines there are years which provide better quality wines. 1990 is one such example; a bottle of first growth from that year is now worth 522% what it was worth when first bottled. Invest in the right wine and you could see returns that any stock market trading would be jealous of.
The idea investment
Wine is only ever produced in a limited quantity and there are places with excellent reputations which almost guarantee the quality. A good wine will still be drunk by many people. If you are prepared to hold it and not consume it then after a few years you will be likely to have a rare, quality wine – which will be in demand. It should then be possible to get an excellent return on your investment.
Know the downsides
As with any investment wine is not foolproof. You must be prepared to shop around when making your initial purchase. You may be surprised at how much a bottle of quality wine can vary in price. There are extra costs alongside the purchase of the wine. Merchants often charge a commission for selling your wine and you will need to factor this in when calculating a profit. In addition, wine must be stored properly; this may mean paying to store it somewhere set up for wine storage. It can be an option to store it at home but the temperature and climate needs to be carefully controlled.
Starting as an investor
Investing is risky and the more you know about the product before you start the less likely you will be to make a simple mistake that could cost you thousands.
- It is essential to build a relationship with a local wine merchant with a good reputation. Ideally, this relationship can be formed whilst tasting a variety of wines and learning about the differences. The merchant may also share his knowledge of the wine industry which may be of use to you.
- Books and magazines are excellent sources of information for any wine investor. They can be read and re-read and even stored for future reference. It can also be of great benefit to visit some of the best vineyards and learn about the wine whilst tasting their products. It will be very beneficial to plan a visit to France and visit the best vineyards in the world.
- Remember that wine is a long term investment. It is very rare for wine to quickly go up in value and can sometimes take as long as twenty or thirty years to see a decent return on your investment.
- Particularly when first starting in wine investment it can be of great benefit to specialise in just one type of wine. Chateau Lafite for example, may be an excellent choice. It doesn’t come cheap, but at least you know for sure that in a few years your initial investment will pay off. This will make it easier for you to learn about the wine and make the best choices for investment.
Wine investment should always be a small part of your total portfolio and when starting out it should be no more than 1% of the whole portfolio. This will ensure you find your feet in this complex market. Once you understand the market more you can increase your portfolio although experts advise to commit no more than 10% of your portfolio to wine investment. This will allow you to minimize risks. Do things by the book and your chances of increasing your personal finances by investing in fine wine are greatly increased.