Wine as an investment? Is it really an option? Is it a good idea to put your money into a product such as wine? Could wine, over time, be a better investment than stocks and shares?
The answer to all of these questions is a resounding yes, of course.
Just like other investments there are many factors that determine profitability, or not. In the fine wine market, one of the most important factors is the product itself. Make the wrong purchase at the beginning and your investment may quickly become a complete waste of money.
The most popular wines in the investment sector come from Bordeuax.
Since 1855 its wines have been divided into five gradings:
- Crème de la Crème (first growth)
- Super Seconds
- Third Growths
- Fourth Growths
- Fifth Growths
First growths can take up to 20 years to mature.
Don’t try to break the mould if you are new to wine investing; stay where the experts are, and as this time, they all talk about Bordeaux.
Why does a fine wine increase in value?
The simple answer is supply and demand. Or in the case of fine wines, the lack of supply coupled with increased demand. After each harvest it is only possible for wine-makers to produce a finite quantity of wine. Once the wines are released it is impossible to produce more. This makes great wines increasingly scarce and therefore pushes up their value.
In general, the longer a wine is left to mature the better the quality, however, there are wines that have a predetermined shelf-life and these would obviously not make a good investment.
The term to watch for when researching wine investing is ‘investment grade’.
Knowledge, expeirence and expectations help establish a wine as investment grade. The decisions are made by wine experts such as Robert Parker Jnr, who uses as points system to rate wine. The highest rating is 100. Any wine Robert Parker Jnr rates at 100 is a serious contender for wine investors. Any wine that has a rating of 90+ should be given the once-over.
Most investment grade wine is available through auctions such as Sotheby’s and Bonhams and certainly not your local Bargain Booze. Typically, investment wine is bought by the case rather than per bottle.
Do it yourself or employ an expert?
It depends upon how much money you want to invest, how much time you can invest in research and your goals. If you want to take wine investing seriously and learn about all the intricacies, then doing it yourself (coupled with advice from experts) is a good way to go. If you are an investor who only considers the profit margins then using a wine broker is certainly the best option.
How much can profit can me made through wine investing?
How long is a piece of string? Some say you can expect a 30% a year return on an investment. This is at the high-end of the range and only wine experts can realistically expect increases at such rates.
Additional costs
After purchasing the wine there are additional costs to factor in – most notably is storage.
Storing investment wine at home incurs an import fee of around £13 per case and VAT on the purchase price. Storing the wine in a warehouse ‘in bond’ reduces the temptation to crack open the odd bottle and carries a relatively cheap (per case) annual storage fee.
