Investing in wine can be an interesting and appealing option for investors looking for a non-traditional investment opportunity. However, without the knowledge and investment savvy specific to wine investments, you could be caught dealing with an expensive hobby instead of a profitable investment. To help you decide whether you’d like to start investing in wine, read this.
In this article:
- Why Is Investing in Wine Attractive?
- The Benefits of Wine Investing
- Finding Balance between Collecting, Drinking, and Investing
- Maximizing Profit Potential from Your Wine Investments
Investing in Wine | Can It Make You Wealthy?
Why Is Investing in Wine Attractive?
There are many reasons for investing in wine. For some people, an excellent bottle of wine is a status symbol. Other wine investors may have different plans for their wine. They are not in the industry to show off their collection unless the goal is to drum up interest among potential buyers. Rather, the intention of investing in wine is to learn the ins and outs of the wine market to avoid enduring some of the pitfalls. Investing in wine may seem like an elitist hobby, but the truth is, you don’t even have to drink/like wine at all to dip your toes into the wine investment world.
The key to investing in wine is to understand that wine can appreciate in value over time. In fact, it can outperform other traditional investments such as the funds in the stock market. One of the reasons for this is that the law of supply and demand affects the value of fine wines. It is a consumable commodity, and there is greater demand for the products than the supply. According to a Business Wire report, global consumption of wines will reach 30 billion liters between 2016 and 2020. By then, there may be fewer quality bottles available even among collectors and investors. This drives wine prices even higher, raising the commodity’s value.
If you invest wisely, you could set yourself up for returns on your investment. However, unlike other liquid assets, you must be willing to hang on to your wine investment for at least five to six years to earn some of these returns.
The Benefits of Wine Investing
For many would-be wine investors, the benefits lie in the education you receive. To be successful, you must learn to speak the industry’s language including:
- Cult wines
- Wine regions that produce the most exclusive wines
- Vintages that retain their value best
- Wines that are truly great wines
- Best practices for storing wines
- Values of various vintages, bottles, etc.
- How to build the perfect wine cellar for your collection
- How to choose government-bonded warehouse for storage
If you do not know the difference between a Bordeaux or Burgundy, consider further education before investing in wine. Wine appreciation takes on a new meaning when you invest. It forces you to transition from simply being a connoisseur to viewing fine wine as an economic endeavor.
Getting there is half the fun when it comes to wine investing. Your primary interests involve returns from your wine collection. You get to enjoy gaining exposure to a variety of excellent wines along the way through wine tastings, wine auctions, and other events designed to solicit your investment dollars.
The other benefit of wine investing is it is a liquid investment, which means it is possible to sell the bottles in most economic markets such as reputable auction houses that specialize in the fine-wine market.
Wine can definitely be a long-term investment, but it pays off only when you educate yourself about the marketplace. Investing in wine is also not limited to buying wine and storing bottles of wine. You may also choose to trade in wine futures, wine funds, and in vineyards themselves. You have a world of opportunities available to you if you intend to invest in wine. In fact, this is a great way that you can diversify your investment portfolio.
Finding Balance between Collecting, Drinking, and Investing
Most people begin investing in wine because they do love the product. It can be a problem, though, since you may end up drinking your potential profits. How do you strike a balance between enjoying a bottle and making it an investment?
An option is to purchase two cases at a time: buy one to drink and one to sell later. Selling the full cases allows you to charge premium rates. You can also enjoy a better return on your investment if you sell the case in the original wooden box from the vineyard.
You can also stick to better-known vintages critics appreciate and score well. Wines netting scores of 95 or better are considered investment grade. However, the greatest demand and appreciation exists for vintages that achieve the perfect score of 100.
Maximizing Profit Potential from Your Wine Investments
Profit is the ultimate goal when you invest in wine and other assets. How much you earn, however, is half of the consideration. The other is the expense that comes with the investment.
When investing in wine, you deal with the following costs:
- Taxes (like the capital gains tax)
- Commissions, fees, etc.
- Costs of obtaining and storing documents
- Losses on some bottles
- Insurance for your wine cellar, equipment, and the bottles you collect
Is investing in wine beneficial? Like other investments, it certainly can be. If you understand the wine market well, it can offer a substantial return on investment. However, also like all other investments, doing your due diligence to understand what you are putting your money into is a vital piece of your investment success.
What do you think about investing in wine? Is it something you are willing to do? Share your thoughts below!