Basics of Wine Investing – Learn Before Buying Your First Case of Bordeaux
There are many types of investments on the current market. However, it looks like the people prefer the tastiest of them all – fine wine. Investing in this sweet liquid asset can bring nice returns, but you have to really know the business first. Since the Wine Spectator Auction Index was introduced, many specialists consider fine wine a steady investment. The index monitors average Bordeaux wine sales throughout top auction houses in the US. The beauty of investing in wine is that you can always enjoy the product, as opposite to other type’s investments such as bonds and stocks.
Due to a fluctuating stock market and a tough economy, people have started to explore alternative investment opportunities. Wine is an extremely popular commodity that can turn into a profitable business. As a first-time investor, you have to learn more prior to spending money on your first wine case of Bordeaux. Let’s have a closer look at some tips for newbie investors:
Provenance matters a lot
For a wine to become fine wine it should originate from a winey or an auction house. The dealer should have a stellar reputation, and as an investor you have to keep records so that you can prove your product is authentic. Selling your wine should also be performed through a dealer. Fraud is very common in this business, which is why doing business with notable experts is so important. Nobody buys and sells wine directly out of their cellars.
Decoding basic facts about investing in wine
Investing in fine wine means a lot more than just stocking your basement with a couple of cases. A novice should first understand the wine. Quality wines come from 5 main regions: Bordeaux, Tuscany, Burgundy, Champagne, and Rhone. Bordeaux wine is the best.
A novice investor’s concern goes beyond understanding the product though. Securing the wine in proper storage conditions may also be an issue. It will cost you $18/month per locker to store your wine in a professional cellar. A locker has between 7 and 9 cases of wine. If you’re a novice in the business, that’s ok. The real issues will arise when you’ll want to expand your collection. Additional expenses will come into play like broker fees, insurance, trading exchange costs and more. Last but not least, you have to be prepared to wait for a couple of years for your wine to gain value.
To remember: wine is not the type of investment that offers fast returns. As an investor, you should be prepared to wait 6-10 years for your portfolio to attain substantial value.
Be ready to take a risk
Investing in wine is risky. The market is steady since 2013, but in the past it took substantial tumbles. Between 2003 and 2011 prices of the world’s best wines rose by 250% due to a boosting demand from China. When the Chinese Bordeaux hit rock bottom, the prices dropped. As you can see, general prices for wine fine are affected by factors nobody can predict. Negative reviews from critics, unfavorable weather conditions, and bad storage conditions and so on, are factors investors can’t control.
Furthermore, fraudsters are now more widespread than ever. At an investment level, wine fraud involves trading forged versions of some rare collectables. The scam can be extremely successful because investors will never actually taste the product.
Investing in future wines
Also known as wine “en primeur”, investing in futures means you’re buying wine in advance, before the bottling process is complete. Here are some benefits of buying wine “en primeur”:
- There are no hidden costs involved
- The prospects of investing in quality wines are extremely high (if you want to be sure you’re making a good investment, opt for Bordeaux)
- Purchase prices are low
- As long as you’re cooperating with a trusted wine merchant, your investment is secure
Novice wine investors with high expectations should devote some time to learning the business first. You may have the capital to make huge purchases, but it’s still a good idea to get informed. Deal with reputable names only and stay away from vendors who want to sell you wine directly. Don’t forget to keep an eye on the numbers and when in doubt ask for advice from real wine connoisseurs.
Category: Investing
So many people have a real passion for wine. Those who can use that passion to explore interesting investment options have a lot of territory to explore. Thanks so much for the detailed breakdown!