Mar 30, 2021

Investing In Wine In 2021 (Pros, Cons, Process)

Interested in investing in wine?

Wine investing is an alternative investment strategy that involves investing in fine wine or wine stocks and selling them for a profit. It can be a highly profitable asset that could generate returns of up to 400%!

This article explores what wine investments are, why you should invest in them, and how you can start investing in wine with as little as $1000.

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This Article Contains:

(Use the links below and jump to a specific section)

What is wine investment?

3 reasons to start investing in wine

3 common ways to invest in wine

3 things to do before investing in wine

The easiest way to invest in wine: Vinovest

What Is Wine Investment?

Wine investing is a popular alternative investment strategy where you invest in certain rare wine types whose value can appreciate (increase) over time if stored in the right conditions. 

Only about 5%-10% of the total wine produced ages beyond one year. And from this, only 1% are meant to survive beyond a decade. Such high-quality collectible wines are usually from premier vineyards in France’s Bordeaux, Burgundy, Champagne districts, Rhone valley, or Piedmont and Tuscany regions in Italy. 

However, some winemakers from New York, Napa Valley, and Australia have also been making fine, age-worthy wines. 

Irrespective of where it’s made, investment wine typically share these characteristics:

  • Age worthiness and longevity
  • The right mix of acidity, tannins, and alcohol that enhances wine’s flavor over time
  • Scarcity due to high demand and/or low production
  • Steady price increases over time
  • High critics’ ratings and brand recognition

Examples of such highly sought-after wines include the Chateau Lafite Rothschild, Domaine de la Romanee Conti, Chateau Latour (Bordeaux, France), Screaming Eagle (California, USA), or the Australian Penfolds Grange.  

3 Reasons To Start Investing In Wine

Wine investment offers these advantages:

1. Potential for diversification

Wine investment is a great way to diversify your portfolio. 

Unlike traditional investments, it has a low correlation to the stock market.  This protects your portfolio from being adversely affected by market fluctuations. 

Wine even has its own exchange. 

The London International Vintners Exchange or Liv-ex is the global marketplace for wine traders and investors.  

Data shows that the wine market has outperformed the S&P 500 over the past 40 years, with only five down years during this period.  

2. They’re tangible and less volatile

Wine, like gold or real estate, is a tangible asset that’s generally considered recession-proof. In fact, during the COVID-19 pandemic downturn, the S&P 500 dropped by 25%, while the Liv-ex index remained more or less unchanged.  

3. Potentially higher returns

Wine investment is a growing, global market full of aspirational investors. This includes retail investors, private collectors, restaurants, etc. 

This has contributed to a steady increase in demand for fine wine, resulting in very high returns for most investors.

For example, some wines from the 2000 vintage of Bordeaux wine appreciated 400% by 2016. And in 2017, a California Cabernet Sauvignon by The Setting Wines sold for mind-boggling $350,000. 

Wine auction houses like Christie’s of Sotheby will regularly report six-figure pricing for single bottles of fine wines from France, Italy, the USA, or Australia.

3 Common Ways To Invest In Wine

You can begin investing in wine via these three common avenues:

1. Wine company stocks

These are publicly traded wine companies whose shares you can buy on the stock exchange. 

Most blue-chip wine stocks also trade in spirits and beers. This means they have a broader range of operations (spreading out the risk) and a higher cash flow.

You can either buy individual wine stock or invest in a wine fund (like a mutual fund) or a wine ETF that buys from a basket of various wine stocks. 

Pros:

  • Invest in profitable, multinational alcohol companies for high returns
  • High liquidity. As they’re stocks, they can easily be bought or sold

Cons:

  • Sensitive to market fluctuations because they’re publicly traded
  • Could incur brokerage costs with every transaction
  • A wine investment fund or ETF may not be wine-specific; they’re focused on alcohol in general

2. En primeur wine

A wine that’s yet to be bottled, and is still aging in barrels, is known as en primeur (or ‘in their prime’) wine or wine futures. People invest in it to secure a portion of high-value wine brands before they’re bottled. 

Today, most en primeur trading happens during the ‘Bordeaux En Primeur Tasting Week’ in March-April of each year. 

Pros:

  • The pricing is more affordable when compared to bottled fine wine, increasing your chances of a positive ROI
  • Only the finest wines get sold as futures. So you can collect rare, fine wine
  • You can buy wine in sizes not freely available in the market. For example, magnums (1.5 liters) or double magnums (3 liters)

Cons:

  • The wine may be too young to determine its future cost
  • Available only during en primeur tasting weeks of select wine regions
  • Not a liquid asset (compared to wine stocks) as your sales will have to wait till the wine is officially released in the market
  • Complex system dependent on traditional negociants (wine merchants) that’s difficult to navigate

3. Buying bottles

You can also directly buy actual bottles of fine wine from retailers or vineyards and wholesale fine wine merchants. 

Pros:

  • Easy to sell to another investor or wine collector on the secondary market
  • It can easily become part of your own wine collection, to be enjoyed whenever you like
  • You have a wide range of wines to choose from, all with varying price points

Cons:

  • Buying investment-grade wine on your own requires a substantial amount of knowledge to get it right
  • You’ll most likely need to pay for packaging, storage, and transportation
  • Fortunately, there’s a way to overcome the drawbacks associated with purchasing wine bottles. If you’re a wine investor, you can invest through a wine investment platform that buys, authenticates, and stores your wine for you.

3 Things To Do Before Investing In Wine

Wine investment is a complex, niche field that requires careful planning. Here are a few things you’ll need to keep in mind before investing in wine. 

1. Research the fine wine market

While you may be a wine enthusiast, the wine trade is a different market. Take your time to understand the wine industry, what drives wine prices, and what kind of wine makes it to the top. 

Find answers to questions like:

  • Do you want to buy wine via an agent or wine broker, or will you purchase it directly from merchants?
  • How can you avoid the overhead costs involved in wine trading?
  • How will you store your investment grade wine?
  • What is the right time to sell particular types of wine?
  • Who will buy your wine?

You may need to spend time researching or seek a wine expert to answer these critical questions. Moreover, you may need to update your knowledge by keeping in touch with the Liv-ex index, auction house results, wine critic reviews, and general wine news. 

2. Allocate funds

Wine, especially the investment-grade variety, is an expensive commodity. A bottle of good, fine French wine can cost you anywhere from $300 to a few thousand dollars. 

Think about your expected return rate and how much you’ll need to invest. Also, consider your risk tolerance for the money you’re setting aside. 

If you’re investing via wine investment platforms, you’ll also need to fulfill some minimum investment requirements. Moreover, distributors may charge a fee for each purchase, so you need to factor that in too.

3. Consider storage

Good wine requires proper storage to develop. 

It’ll need to be kept in optimal temperature, humidity, light, and pressure conditions. 

Wine fridges, wine cabinets, or underground cellars are the most popular wine storage options. 

However, it doesn’t make sense to invest in expensive storage facilities (like building a wine cellar in your house) for a small collection. For just a few bottles at a time, you can consider outsourcing to a wine storage service for a fee. 

Clearly, there’s a lot that you need to take care of before you can invest in wine. 

But there’s a way to streamline these issues easily. 

The Easiest Way To Invest In Wine: Vinovest

Vinovest is a fine wine investment platform that aims to democratize wine investments for all investors. It’s an AI-driven wine investment platform that lets you buy and sell fine wine globally. 

The process

Vinovest, with the help of master sommeliers, prepares your wine portfolio based on your risk tolerance and long-term goals. They buy these wines directly from winemakers or wholesalers to ensure that you get the best prices. 

Finally, they store these bottles in exclusive cellars, where they remain until you decide to sell or drink them. They also offer doorstep delivery if you wish to keep the bottles yourself.  

Minimum investment

You can start investing with Vinovest from $1,000

Fees

Vinovest charges a fixed, annual fee of 2.85% (2.5% for investment above $50,000). This fee is spread out monthly on a prorated basis, based on the total value of your portfolio. It also includes a comprehensive insurance policy for your wine portfolio. 

Potential returns

The average five-year back-tested return for a typical $10,000 Vinovest portfolio (with moderate risk tolerance) is 12.4%, after fees. This can go up to 16.6% with an aggressive investment strategy. 

 

Start Investing In Wine Today

Wine is an excellent alternative investment option to diversify your investment portfolio and take advantage of a growing asset class.

And if you’re looking for other similar alternative investment opportunities, consider taking the MoneyMade Investor Quiz. All you need to do is answer a few simple questions, and you’ll discover a range of investment opportunities tailored to your needs. 

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