Investing in Wine – Assets in the Red (and White)

Elegant investing: Sip your way to riches

There is rising interest in wine as an asset class — an investment of the same type as stocks, bonds, or works of art. But the additional appeal of investing in wine is that it is a form of elegant collecting, not vulgar trading. Take your money out of the volatile stock or bond markets. Avert your eyes from the precipitous indices, and calmly sip great vintages, confident that the value of your assets will rise over time.

Alternative investments of this type – art, jewelry, wine – are not meant for getting rich quick. They are investments that are meant to be kept for a fairly long time, as they appreciate gradually. The wine collector has, for centuries, amassed a cellar full of valuable bottles. Those that did not appear at the dinner table sometimes made their way to the auction house where they helped finance future purchases by those investing in wine.

Why Are We Investing in Wine?

TKE Jainu-Deen is the CEO of Canary Wharf Vintners, portfolio managers, and purchasers for wine investors. He explains,

While it is possible to invest in wine for a relatively short term, this is a relatively risky strategy. Generally, wine prices don’t go up in a linear fashion but tend to experience fairly short periods of upward activity. Timing is therefore everything when it comes to buying and selling fine wine in the short term. But such speculation will always be a much more risky and volatile endeavor compared to a longer-term investment strategy which has a relatively low level of risk compared with investing, say, in stocks and bonds.”

According to statistics from Live-Ex, the online trading platform for fine wine, in the last 20 years fine wine has done better than some equity and fixed-income indexes, including the FTSE 100. For long-term investors, a well-chosen and balanced wine portfolio should provide annualized returns of around 10-12%. But it is not unusual for investors to do better.

Can You Get a Decent ROI?

Fine wine is concentrated on a small group of the very best wines. “It is the very top group of about 1000 wines that are considered for professional investment,” comments Steven Langley-Goodman, of the Liverpool-based firm FCF investments. “Wines in that group are likely to find another buyer, and they are quoted on the online trading platforms like Live-Ex, BBX, and Cavex.”

The Bordeaux First Growth vintages are foremost among these. Early investors have enjoyed healthy gains. For example, in 2011 an investor could have purchased a bottle of Chateau Latour for about $1500US. In 2022, it was worth about $6500.

The wine investment market has become a bit more diversified. Of the Live-Ex 1000, Burgundies now account for 150, and Champagne 100 (there are even, gasp, 50 from outside Europe).

One of the best investments is Burgundies Domaine de la Romanée Conti, whose six wines have risen 109% in value in recent years.

The Bottom of the Glass

A more conservative way of investing in wine is through wine funds. For a collector still on the steep part of the learning curve, wine funds permit investment managed by experts. Three such funds offer prospective collectors access to American companies.  The Elevation Wine Fund, The Wine Trust, and Bottled Asset Fund

are like mutual funds: Initial investments run between $20,000 and $50,000. Fund managers buy, hold, and sell the finest bottles, returning gains to the fund.
For the investor who likes DIY, Jainu-Deen advises starting on wine-searcher.com. Here, users can find current prices and participate in trading. This is a good place to look for opportunities such as the great Bordeaux vintages.

There are wide choices for investing in wine. For the collector who can work at any level of investment, the greatest challenge remains: to save or to drink.

We think you’ll also like:

• How to Protect Your Assets Now to Cover Your Ass(ets) Later
• Alternative Assets and the Average Alternative Investor…
• Three Tangible Asset INvestments to Delight Your Inner Child

[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure and each includes a comprehensive customer PowerPoint about the topic):

• All About Asset Allocation
• Cannabis Investment: Successes, Failures, & Strategies for the Future 2021
• Foreign Corrupt Practices Act

This is an updated version of an article originally published on December 3, 2019. It has been updated by Maryan Pelland]

©2022. DailyDAC^TM, LLC d/b/a/ Financial Poise^TM. This article is subject to the disclaimers found here.