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31% of MoneyMade members invest in Wine
Wine Market vs S&P 500 Returns
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Sources: Liv-ex 1000, SPX
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In the Market
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Over the past decade, fine wine has demonstrated stable growth with low volatility. During the Covid-19 pandemic, the asset class provided consistent returns as a safe-haven for investment capital to grow modestly with low risk of a sharp downturn. The Liv-ex 100 has shown positive returns every month since June 2020. The key driver of this growth is a structural shortage in investment grade wines coupled with increased demand from investors. While new marketplaces are enabling everyday investors to tap into an asset class historically dominated by high net worth individuals, potential investors should consider that encouraged hold periods are long and liquidity is limited.
Did you Know
Burgundy is the most valuable wine region, with two of the three top performing wine brands in 2020 (Leroy and Leflaive) hailing from the area.
In 2010, one bottle of DRC La Tache (with a total supply of 22,000 bottles) was worth $693. By 2020, one bottle had sold for $6,851.
While there are hundreds of thousands of stocks, there are only about 50 brands matching the criteria for investment-grade wine.
Investing in wine adds a finite, tangible asset with a global appeal and a limited supply to your portfolio
Low risk, stable returns — wine has lower volatility than the S&P 500, gold or real estate
There's currently a global shortage of investment grade wine, driving up values on the secondary market
Reasons to Invest
There's a barrier to entry: it can be difficult for an everyday person to gain access to the winemakers producing the world's best investment-grade wine.
Wine must be stored properly in order to maintain its quality and value. This involves a working knowledge of wine storage and can involve significant costs, such as adding a cellar to your home.
Ironically, wine isn't a very liquid investment. When it comes time to sell your wine investments, it might take a while to find buyers.
How You’re Taxed
If you are investing on a wine investment platform like Vinovest, where you own a fraction of a case or bottle of wine:
- Sale of wine: When your holding is sold, you receive the equivalent of a dividend. Your profits are then taxed as income.
- Secondary market: If you trade your shares on the secondary market, your profits are taxed as capital gains.
For those of you selling a bottle or case of wine you purchased, these investments are classified as 'collectibles.' Gains on cards held for one year or less are taxed as ordinary income—the same tax treatment as short-term capital gains (STCGs). Gains on cards held more than one year are taxed as ordinary income, except the maximum tax rate is 28%