Oxstones Investment Club™Investors aware of the present turmoil in the stock market may have a unique opportunity – to satisfy their thirst for sensible profits by investing in fine wine. However, they need to be patient to see results. Wine investing demands about 10 years of waiting, and only the savviest investors can do it. Analysts agree that there’s a new analytical tool that is aimed at helping people invest in wine and reap substantial benefits.
According to the officials at auctionforecast.com, the recent opportunity to use wine as a fruitful investment came from the Chinese, who are instrumental in today’s global stock market. Because the stock market in China has crashed – bringing down prices in fine wine, there’s now a chance for investors to pay more attention to their wine market and consider it a long term investment with lots of potential.
Skepticism surrounding the wine market
However, there’s still a lot of skepticism surrounding fine wine investments. Many agree that investing now is just for “show”, and that there’s a lot of risk involved. Certain economists agree that wine was a good investment only in 2007 and 2010, and that right now investors should steer clear of it. Nevertheless, those that are willing to wait might have a chance at seeing outstanding returns. Vintage wines in particular, are still extremely valuable. There’s a market edge accumulated to this niche that experts in economics can’t deny.
Burgundy and Bordeaux wines are high-end collectibles with potentials returns of nearly 50% over a period of 10 years. Market analysts argue that as the wine consumption rate in China has increased considerable – from 69.3% between 2009 and 2013 – the demand for top-quality wines started decreasing as of 2013. The principal reason for the decrease has something to do with the government anti corruption initiative endured by wealthy Chinese pepe who stopped partying and offering fine wine as a gift.
Recent fine wine boom in the Shanghai Composite Index
According to data auctioned to craft the Bordeaux index, the recent price rate have been initiated by the recent boom in the Shanghai Composite Index which, in mid-June, dropped to a staggering 34%. In January this year, the Bordeaux index increased, following a 47% boost in the stock market (this lasted over a period of 6 months). After that, it instantly dropped in spite of the Chinese stock market’s climbing rates.
It is believed that this occurred due to the fast rise & fall of the fine wine market, followed by the stock market. There’s a major culprit for these spikes – sophisticated Chinese investors made the decision to pull their cash out of the stock market, and use it to invest in wine because they anticipated that the stock market would crash.
Following the rout in the stock market, the Bordeaux index remained relatively low, since the Chinese market has no inflow. There’s a similar connection between Chateau Lafite Rothschild wine (which is one of the most expensive vintage wines in the world) and the Shanghai Index. The correlation was felt between 2010 and 2012, when the “Lafite Bubble” occurred.
At that time, significant increases and decreased happened in the Shanghai Composite, which led to an increase of nearly $4,000 for 1 Lafite wine bottle in 2011. At the end of 2012, that price dropped significantly. There’s no way of predicting when and if the Chinese market will crash for good; either way, investors are advised to hold on to the buy & hold strategy because it might soon yield an historic 50% profit margin – the highest in 10 years – even though the market doesn’t manage to get back on its feet.
Some wine experts advise investors to take caution when investing in wine. Most wines are not considered “investment grade wines” (which are low risk). Stocks yield dividends, but that does not mean wine will too; in fact, wine only provides capital appreciation. Wine can and will give investors “an edge” over other types of investment available. It is a way to diversify a portfolio and may provide protection throughout market downturns. But wine can’t offer you a guarantee, not to mention that investors must know the market before investing to make sure there’s real potential not just give hope.
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