Wine investment can be rewarding in more ways than one. Besides the profits you can expect to pocket when the wine is ready to sell, it has certain benefits that cannot be obtained by putting the same money into the stock market. Wine is a tangible product that you can actually look at, show to friends and even enjoy on special occasions. The only question that remains after the purchase is choosing the prime time to sell. When the bottles or cases are properly stored in a bonded warehouse or home cellar with ideal conditions, the wine will increase in value while reaching maturity.
All in the Reputation
As with all investments
, the goal is to buy low and sell high, but there are a few factors that determine the price a bottle can bring on the market. One is the vintage, because some are much more dear than others. The wines purchased from estates with the best growing and harvesting conditions can be expected to bring higher prices. Another influence is the ratings a vintage receives from important wine critics. It can happen that the reputation of the wine can influence the price more than the contents of the bottle. There is a tendency to think that old wine must be the best and most valuable, which is reflected in the selling price. That being said, the future aging potential of the wine clearly affects the price.
Supply and Demand
There is no doubt that in the wine market, supply and demand plays a huge role. As the wine matures, its rarity also increases. By the time it comes to full maturity, it is more valuable due to its scarcity. While in Bordeaux the supply of wine is limited, there are other wineries that purposely keep production low so the price will remain high.
Fine wine is slow to react to immediate changes in the global economic situation. However, as with all investments, at some point the wine market mirrors that of the rest of the world
. During periods of devastating economy, history shows that even the wine market can be temporarily affected. The good news is that even during these periods, the wine continues to age and improve!
In terms of alternative investments for 2014, fine wine from Bordeaux, France can be a safe bet. Tried and true, it continues to represent a stable investment that will bring steady profits to the savvy investor. Don’t get me wrong—I do not mean to say that every wine investment is advisable or can be considered safe and risk-free. There are a few crucial points to keep in mind when stepping outside the traditional stock markets or conservative financial investments. They are very simple, but worth remembering.
- Think for the long term. Every fine wine has an ideal storage time, where it sits to mature and develop the most desirable characteristics. Don’t rush it! Understand the shelf life of each wine that you buy for investment purposes and store it according to its own specifications. Wait until it has reached its peak to sell for top dollar.
- For solid investments with the least risk, buy the finest vintages from the most respected châteaux in Bordeaux. This limits your search to a few dozen châteaux and makes the wine selection process much easier. While some wines will increase in profit more than others, it would be hard to go wrong with stock from one of the well-established estates.
- Keep your wine investment tax free by following the specific criteria for wasting assets. It not only needs to have a shelf life of less than 50 years, but there are other rules concerning limited partnerships. Here you should check with tax authorities or use the services of an experienced broker.
- After you buy it, keep it safe! To maintain its value while it is aging, wine needs to be kept under carefully monitored conditions. When the time is ripe for you to sell your stock, your storage records will be very important, so this is not a place where you should skimp. Make sure that your investment is stored in a bonded warehouse with insurance coverage at replacement value to cover any possible damage or theft.
These four steps are only the beginning, but using them as a guideline to safe investing will help you limit risk while increasing profits on your investment.
Where saving for the future is concerned, many savvy investors have turned to tangible assets that they can touch, feel, see, display and enjoy. That is why investments in such alternative investments as art, gold, diamonds and wine are becoming so popular. When you buy a work of art from a trusted artist that will appreciate in the coming years, you can get double duty by hanging the art on your wall and enjoying it every time you pass by. The same goes for gold and diamonds, as you can derive immense pleasure from wearing your investment and letting everyone enjoy seeing it instead of keeping it hidden away under lock and key until the price is right to sell. Wine isn’t exactly the same because you can’t wear it or display it, but it is a tangible asset that you own and can turn to profit whenever it suits.
Instant Monetary Gain
Some investors choose to put their money in real estate, which can also be a good hedge against inflation. However, if you need to raise funds quickly, you must sell the entire piece of real estate. Not true with wine. If you need money today and you happen to have a bottle of Mouton-Rothschild 1996 in your wine cellar, you could put it up for auction and make a bundle. A bottle that was purchased from BWC in 2010 for £2,900 can bring you £4,104 in today’s market. That profit of 42% in only three years would be hard to find anywhere else in the market.
Tenfold Increase and Rising
According to an article in the New Statesman, levels of investment in the Fine Wine Market (FWIM) over the past decade have seen a tenfold increase. That increase is in part because of the volatility that has existed in the more traditional banking sectors and equity markets. With new interest coming from the US, China and Russia, those figures will only increase.