One of the most common pieces of investing advice that you’ll come across is the need to have a well-diversified portfolio. Many swear by this strategy, mostly because it can help investors to weather volatile periods in the market and mitigate investment risks. For investors who follow this advice, a typical portfolio will include a variety of bonds, stocks and probably some alternative investments.
One of the alternative investments that investors have warmed up to over the years is wine investment. Often placed in the same category as antique cars and fine art, wine investments function pretty much the same: invest in a tangible item whose value may rise with time. More specifically, investors are putting their money in bottles of wine in the hope that by storing them, they may sell at higher prices in the future.
It may seem a little sophisticated, but wine investing is not a novel concept. For years before fine wine became globally appreciated, smart buyers often purchased above what they could consume and sold the excess bottles later, with the proceeds channelled into future purchases.
It takes a bit of research to understand the similarities between typical financial and wine markets, but the connecting string is that the more individuals invest in wine, the more its market starts to take on the characteristics of a financial investment. For the most part, the wine market has shown resilience in tough times compared to other sectors, with good reason. It’s a tangible asset that many aspire to learn more about and consume. For enthusiasts, it has more real use than gold, for example, and can be enjoyed easily. Also vital is the fact that fine wine is limited in supply, thus creating a demand for it.
Across the world, various firms deal in wine investments. In Britain, the oldest such firm is Berry Bros. & Rudd, which has traded since 1698. The company has established itself as an expert in matters of wine investing, having opened offices in the Far East, established a wine school, and operated a fine wine and dining venture in St. James’s (London).
Among the investors who’ve chosen to use Berry Bros. & Rudd is Thomas Noel Collister Jackson, a UK-based entrepreneur who appreciates vintage wines and has seen value in wine investing.
Investment Pointers
- Research – Like any other financial investment, proper research is required before putting any money into wine. Potential investors need to understand the product and how a wine appeals to collectors. As a general rule, the rarer the vintage wine, the better, since it will likely have more demand. Where a wine comes from is also an important aspect, as wines that come from regions with the history of producing top-notch vintages will be more sought after.
- The Investment – Fine wine doesn’t come cheap, so a typical investor probably needs several thousand in available funds to invest. Depending on the wine selection, you can start with a case or a single bottle.
- Storage – Fine wine must be properly stored for two reasons. First, storage ‘under bond’ ensures that the owner doesn’t have to worry about taxes and duty on the wine, which can add to the costs. Second, good wine has to kept under certain conditions where aspects such as temperature and humidity are controlled. Wine investors such as Berry Bros. & Rudd typically offer professional storage services at a fee.
The key to wine investment is selecting the right wine at the right prices. With proper research and an understanding of the market, this alternative investment route can be a valuable one over the long term.