How to Start Investing in Wine (For the Rest of Us)

How to Start Investing in Wine (For the Rest of Us)

Looking to diversify your investment portfolio? Fine wine’s annualized returns are simply intoxicating.

Nov 12

How to Start Investing in Wine (For the Rest of Us)
Wine

Wine

Long Term Growth

Long Term Growth

Extra Income

Extra Income

Cabernet Sauvignon, Chateau Latour, Leoville Las Cases—everything about wine has an exclusive ring to it. For most of its history, investors shied away from this asset class because it required deep knowledge—and even deeper pockets. Due to these two factors, investing in wine is often labeled as an elite pastime.

Well, this may come as a surprise, but wine investing isn’t only for the upper-class and the newly minted GameStop millionaires anymore. You don’t even have to be a Master Sommelier to select the perfect vintages. Today, anyone with a little bit of interest and some money to spend can curate their very own portfolio of investment-grade wines.

Why invest in wine?

The two main reasons to invest in wine are to diversify your investment portfolio and potentially outpace the stock market. The fact that wine is a tangible asset with intrinsic value (bottoms up) doesn’t hurt either. 

Hedge against sour crashes

Fine wine is an uncorrelated asset, meaning it's resistant to market crashes. During the 2008 recession, the Liv-ex Fine Wine 1000—an index that tracks 1,000 of the best investment-grade wines around the world—shed a measly 0.6% as opposed to the S&P 500’s loss of 38.5%. Similarly, the Liv-ex 1000 only dipped 4% compared to the S&P 500’s 25% plunge during the 2020 global pandemic. 

In the last decade and a half, annualized returns for the fine wine market have stood at 13.6%, outperforming ETFs and global equities while being even less volatile than gold and real estate.

Gain exposure to sweet returns

Since the weather and climate affect the quality of grapes, each harvest produces a unique vintage. And each vintage has distinct taste and characteristics, despite coming from the same vineyard and grape varietal. These nuances, coupled with the limited availability, create a huge demand for some wine varieties. 

In the period between 2010 and 2020, certain wine bottles generated a total return of 888%. Case in point: In 2010, one bottle of DRC La Tache (with a total supply of 22,000 bottles) was worth a mere $693. By 2020, one bottle had sold for $6,851. Savor that.

An asset you can see, taste and touch

Unlike investing in traditional assets like stocks and bonds, investing in wine adds a finite, tangible asset with a global appeal and a limited supply to your portfolio. It's deeply entrenched in the fine-dining culture, and wine collectors treasure good vintages and buy them in bulk, creating a continuous demand for fine wine.

And it gets better. Each time a bottle of wine is consumed, the supply dwindles, driving up the prices of the remaining bottles. A shrinking collection of fine vintages is the primary driver of wine's long-term appreciation. You can’t just create fine vintages out of thin air like a company stock split or government money printing.

What is a good investment wine?

Investment-grade wine is a type of wine whose value is likely to appreciate in about five or more years. These wines have a quality that gets better with age. With only about 50 brands matching the criteria for investment-grade wine, there's a shortage in the global supply of it. And you know what that means if you're investing in wine—cha-ching.

Characteristics of investment-grade wines

  • Age-worthiness: These wines have the right mix of alcohol, acidity, tannins, and flavor to improve their quality as the wine ages.
  • Scarcity: An investment-grade vintage is in short supply, and its value appreciates as the supply dwindles. Savvy investors maximize their margins with Futures. These are unbottled new vintage wines whose price is likely to soar once they're bottled. 
  • Ratings: Any wine rated by critics as classic or 95/100 is investment-worthy.
  • Pedigree: Winemakers’ reputation and growth count a great deal. Vintages from viticultural areas and famous regions such as Burgundy, Bordeaux, Rhone Valley, and Tuscany tend to age well. 
  • Longevity: An investment-grade wine hits its peak maturity a decade or so after it's bottled. Premium wines can age for well over 25 years. 
  • Price trajectory: The value of the wine brand must have appreciated for a decade or so in wine auctions. 

Things to consider before investing in wine

Investing in wine is a delicate undertaking that requires adequate preparation. Here are the critical factors to consider.

Proper storage

You should store investment wine at 55° F, 60% absolute humidity, and away from light and vibration. Improper storage may cause the wine to mature too early or lose its flavor and ruin your investment. There are two popular storage options:

  • Wine cellar: You can convert your basement into a climate-controlled wine cellar or purchase a wine cooling unit. Naturally, you need quite a bit of cash to take this route.
  • Professional storage: Wine exchanges, auction houses, and investment platforms offer reputable wine storage facilities. With professional storage, you only pay a service fee and for insurance. 

Minimum investment

You don't need a crazy amount of capital to venture into wine investing. You can build a starter portfolio for about $10,000. It’s best to diversify your portfolio with vintages from different regions and a mix of name brands and upcoming collectibles.

Authenticity

Wine fraud is rampant, so you need to vet your sources carefully. Ideally, you should procure investment-grade wine from reputable auction houses like Sotheby's or Christie's. Wine brokers and Wine Stock Exchanges are also good sources, in addition to buying directly from wineries and specialty stores.

Building connections

Although it's more accessible, wine investing still has an elitist feel to it. What does this mean for you? To maximize returns, you may need to invest in establishing relationships with specialty shops, other wine collectors, auction houses, wineries, and more.

4 easy ways to start investing in wine

Getting started in wine investing in the traditional way works, but only if you have dedicated resources. It may prove to be too much for most people. Luckily, there are easier (yet equally lucrative) ways to invest in wine.

Wine Funds

Wine funds are similar to private equity funds with active managers who are tuned into the market.

Exchange-Traded Funds (ETFs)

Wine ETFs are a great way to diversify your investment portfolio while allowing you to access the lucrative wine market. There are no dedicated wine ETFs, but they're covered under some alcohol ETFs. So, unfortunately, you can't build an ETF portfolio of purely wine.

Wine Stocks

Investing in wine stock is simply buying stock in a winemaking company. Like regular stocks, some wine stocks pay dividends, but they may be more lucrative. The growing global demand against a finite supply of wine often raises the value of wine stocks.

Wine Investing Platforms

Dedicated online platforms like Vinovest and Vint make wine investing more accessible to your everyday investor. 

On Vint, you browse expertly-curated thematic wine collections and buy SEC-qualified shares for as little as $50. The best part? They charge no annual fees for their storage facilities and insurance.

vint

Vint

Collectibles

But if you want something that’s even more passive, check out Vinovest. The online platform was built to offer wine investors a completely hands-off experience. 

All you need to do is define your investment style and fund your account. Then you just sit back and watch their Master Sommeliers and wine AI curate a portfolio that suits your preferences and risk appetite. 

Monitor your portfolio as it blossoms, and add or sell the wine bottles whenever you like. You can even request your bottles to be delivered to your home. Just take it easy after that second glass, okay?

vinovest

Vinovest

5.0

Collectibles

The bottom line… bottoms up!

Investing in wine isn’t outside the retail investor’s reach anymore. With a little money and an understanding of where to look, anyone can invest in wine. New wine investing platforms like Vinovest and Vint make the process as easy as possible for those who want experts to do the work for them. All this considered, wine investing may be a promising addition to an otherwise diversified portfolio.

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2020 was shaping up to be a terrible year for fine wine. With the lockdowns, political turmoil and increased US tariffs, everyone was expecting the market to go belly up. Well, not only did it start to recover during the summer, it hit a 10-year high in October. Any idea why?

Consumption down, prices...up?!

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