If you’re not already investing in fine wines, and you enjoy drinking wine, you may want to diversify. View it as you would a piece of art with quality, rarity and provenance all key elements.
Over the past 10 years, fine wine prices have risen 149%, the second-highest return of any alternative investment after whiskey (322%), and well ahead of cars, coins and jewelry.
Of course, investing in fine wine isn’t new. If you invested $100 in fine wine in 1952, your investment would now be worth around $420,000. In comparison, $100 invested in the stock market then would now be worth $100,000.
New collectors should plan to wait six to 10 years before selling. Most fine wines need to mature before reaching peak drinkability and demand in the secondary market.
When buying, be aware that some wine auction sites prefer to sell wine in sets of three, six or 12, while some require full cases. So plan to purchase at least three bottles of each wine if the end goal is to sell.
And if you don’t have one already, consider building storage or finding a reputable facility. Storage is critical for any worthwhile investment like art, clothing, cars or wine.
Still not sure? Consider this: While annual returns of 10% to 15% are standard, some bottles skyrocket. Wines from Domaine de la Romanée-Conti, one of the world’s most prestigious wineries, regularly show growth of 150% to 200% over a five-year period.
Also, fine wine investment has very little connection with the stock market, making it stable even during uncertain economic periods. During the recession of 2007/2008 the S&P 500 plunged 38.5%. During the same period, London International Vintners Exchange (Liv-ex) 1000 index for fine wine dropped just 0.6%.
Again in March 2020, the S&P 500 fell by 25% while the Liv-ex 1000 fell just 4%.
Fine wine prices are dictated by supply and demand and the supply is limited. Even better, every time a rare bottle is popped, the value of the remaining bottles increases.
Wineries are an excellent starting point for young wines to hold long term. Top auction houses frequently hold live auctions for in-person buyers or phone bids. Auction houses like Sotheby’s, Christie’s and Acker Merrall & Condit Co. have respected reputations.
Online auctions are also popular. Brentwood Auctions and WineBid, both more than 25 years old, hold weekly online wine auctions.
You can also buy wine online through exchanges like Liv-ex. Wines trade like stocks where buyers and sellers connect directly and pay a commission.
Do your research, regulation is scarce, which leaves quality control to the owner. Wine investors need to do their due diligence — verify the pedigree of all new purchases and safeguard your collection with proper storage.
