Investing in Wine

One of the most universally accepted guidelines when it comes to making smart investments is to place your money into something that you are passionate about. It’s a principle based on logic and it makes a lot of sense. In order to see real gains, one needs to have ones finger planted firmly on the pulse of whatever market they decide to get involved in. This requires tireless research, networking and attention to detail, a mindset that is challenging to maintain when your investment portfolio is made up of things that really don’t interest you. Markets all across the globe are seeing an increase in consumer interest in artisanal products. People want hand made products that offer exclusivity and quality. It’s no surprise then, that more and more savvy investors are choosing fine wine as an alternative to more conventional investment options.

So what makes fine wine such an attractive investment option? Many may be surprised to know just how lucrative a smart investment in rare wine can be. In one study, the increase in value of shares, gold and wine were compared over a period of 30 years. The prices of gold, the German share index and five selected Bordeaux wines were compared with a starting index of 1 000 units in 1971. By 2001, the value of gold had increased from 1 000 to 6 517 points, the shares value had increased to 11 192 points and the value of the selected wine portfolio had grown to an amazing 162 323 points, well over ten times the value of the shares.

So investing in wine suddenly sounds like a great idea? Well don’t just jump in your car and head out to your local liquor store to pick up a few cases of cheap Merlot. Unfortunately, it’s not that easy. What makes any particular wine valuable is the very fact that they are exceptionally hard to come by. Only wines of the very highest quality, produced in very limited quantities, are potential investments. The wine must come from a clearly defined area and if previous vintages have proven to have a long lifespan, all the better. In a nutshell, buying wines from producers who do not boast a long history of exceptional wines is a risky investment.

The safest bets for anyone new to the wine investment game are Bordeaux wines. These wines have proven their quality over centuries and there are, in fact, very few wines from outside Bordeaux that hold any real investment potential. The area’s five premier cru (first growth) red wines are among the most valuable in the world and represent the pinnacle of secure investments when it comes to fine wine. One such wine set the world record for price at auction when a 1787 bottle of Chateau Lafite sold for an incredible $156 000. The bottle was once thought to be owned by Thomas Jefferson.

There are a number of important considerations that anyone looking to invest in fine wine should bear in mind. Firstly, wines with real investment potential can only be purchased through reputable wine merchants and cannot be purchased directly from the producers. This is the only way for the industry to protect itself from inscrutable operators. Secondly, if one should decide to invest in wine, it is not necessary to have a fully kitted out wine cellar. It is common practice for investment wines to be stored ’in bond’, in a warehouse. This avoids import tax, shipping costs and the inevitable risks involved in transporting your investment. In order to store in bond, one would have to set up an account with a merchant or storage specialist and pay an annual storage fee.

Fine wine represents an exciting and potentially profitable investment opportunity for wine lovers and those who appreciate the finer things in life and the best part is, should your investment depreciate in value, you’ll still have some of the finest wine in the world to drink. A surefire way to eliminate the pain of loss.