Oxstones Investment Club™Connoisseurs and oenophiles are always watching for prime vintages to become available, and the latest releases from Bordeaux and Burgundy may draw a crowd. Not everyone buys wine just to savor the bouquet, though. More and more people are realizing that wine can be an admirable investment, too. If you’re ready to add something different to your portfolio, wine could be an excellent choice. The key to making good money investing in wine is to know the market; as long as you’re properly informed nothing can influence you in a negative way, and all the decisions are yours to make.
How wine investments have performed
Since the early 1980s, wine prices have shot up. This is especially true for the highly sought after Bordeaux wines, which have skyrocketed in value. To give you an idea, a case of Chateau Latour, one of the most famous winemakers in the region, cost $400 in 1982. Today, you’d pay about $33,000 for the same thing. With whopping increases like this, it’s no wonder investors are eyeing wines as an asset class, and stocking their cellars.
Of course, there’s no guarantee that future years will show this kind of rise in wine prices, but investors around the world are snapping up fine wines. For a broader range of wines, the Knight Frank Luxury Investment Index shows price growth over the last 10 years at 166 percent.
Types of wine investments
Many investors are small buyers, who pick up a few bottles of different classic wines now and then, and stock their cellar with wines to drink, and wines to sell later, hopefully for a nice profit. These people know what they’re doing, and they’re perfectly aware that a sensible wine investment is directly linked to proper storage conditions.
More serious investors purchase wine futures, called “en primeur”. This means buying wine while it’s still in the barrel. You pay up front, and receive the wine a year or two later, after it has matured and been bottled. This is a standard practice for Bordeaux wines, and it’s often the only way for a consumer to get their hands on a high demand vintage.
There are also wine funds, where you pay the fund manager to handle the selecting, purchasing, storing and selling of the wine. While this makes it easy and trouble free for the investor, you don’t get the satisfaction of seeing a cellar full of fine wines, and you don’t have the option of drinking one of them for a special occasion.
Considerations before investing in wine
Fine wine has to be stored in perfect conditions in order to maintain its quality and value. Unless you have a temperature controlled wine cellar, this could mean paying for professional storage facilities, which adds to your cost. You’ll also need to pay for insurance on your wine; unless you’re just selling a few bottles here and there to your friends, you may also run into legal difficulties, depending on where you live. In the US or Europe, you can sell fine wine at auction, but in Canada, there are restrictions about private citizens selling wine.
Many investors get around rules like that by buying wine futures in New York, having the wine professionally stored in a bonded warehouse, and later selling it at auction. However, this all incurs costs and complications that you don’t have if you’re storing a few bottles in your own cellar. Some small scale investors buy a case of a premium wine, planning to sell half of it after its aged for some years and increased in value, and then drink the rest themselves.
By making some savvy choices, they can drink the finest wines in the world, for free. For some people investing in wine is not just about making a fortune. Buying good wine that tastes good is equally important. If you can’t or don’t want to sell it, you have 20 years to drink it. In the last 10 years people have finally realized that the fine wine industry is not as tricky as it seems. It’s not a dicey investment anymore; it’s a shrewd investment where only the bravest will reap great benefits in the end.
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