Coins. Stamps. Autographs. Dolls. Baseball cards. Guitars. What do these seemingly random objects all have in common? That’s right, they’re collectable. These days people will collect just about anything, but the real question is, are those collections actually worth anything if the rainy day comes? In other words, is collecting things just a waste of time and money?
As a child, I collected many things. Rubbers, Stickers. Pokemon cards. I even collected a few boyfriends for a while… I’ve still got all of these collections – bar the boyfriends – as they’re not worth anything so what would be the point in selling and maybe my children and grandchildren might get a kick out of them when I’m older(er) and grey(er).
As I slide towards my half-century, my love of collecting has once again been aroused. Except this time it’s not ne’er do wells and cuddly toys that interest me; it’s so something that will actually help me in my winter years. Smartphone apps like Vindome’s wine trading app have greatly enabled this new hobby of mine. I suggest you download it if you too enjoy collecting wine and are looking to invest in something sexy that will increase your spending power over time.
What are collectables?
Under the umbrella of collectable investments, some of the most covetable are passion items, aka collectables. Whether it’s 17th-century Dutch Masters, cases of Lafite-Rothschild, vintage Ferraris, limited-edition sneakers or luxury handbags, investors are adding collectable assets to their portfolios faster than you can say Yeezy.
Collecting these collectables offers a diverse way to have, and perhaps more importantly, to hold, the things they love the most. Collectors gather these tangible assets because they love them. Investors hang onto them in hopes they’ll increase in value over time. Collectors want them, and investors have them. It’s a win-win for both sides.
Not to be ignored is the nostalgia effect on the value of collectable investables. Financiers know that nostalgia cycles arrive every two to three decades, so what is popular now could become an antique of the future as adult collectors wish to reengage with their past. This, of course, works well with clothing and toys; however, when investing in more lucrative alternative investments, some maths and trend analysis are required.
Are collectables prone to fraud?
But this doesn’t mean you need to be buying any old Chateau Cheval Blanc. Anything that is likely to generate ROI (return on investment) is a label for fraud, and that includes fine wine.
Cool, charismatic, badly intentioned people who spin yarns that are so convincing we all end up believing them are rife in the fine wine industry, so savvy investors really do need to keep their wits about them if they are considering investing through a third party.
Who can forget the tale of Rudy Kurniawan, an Indonesian citizen of Chinese descent who began selling fake wine to US collectors in the early 2000s. He had all the hallmarks of a great wine broker, which are ironically, almost exactly the same as those of a great fraudster – buckets of charm, enough knowledge on the subject to sound convincing and an understanding that people with money want the best.
Regrettably, con artists are everywhere. And fine wine, as we all know, is an arena where you need to do your homework before making any decisions. How do you know what you’re buying is the right wine for your needs? How do you even know that the contents of the bottle is what it says it is? After all, if you’re not even planning to open that mythic bottle of Mouton-Rothschild 1949, how can you even tell that what’s on the inside is really what it says on the outside?
Enter NFT, NFC, and blockchain. These new technologies guarantee transparency and provenance of your asset while ensuring security and, most notably for investors, anonymity. Every case sold on the Vindome platform has been inspected approved and securely marked with a unique NFC (Near Field Communication) microchip tag directly at the bottling facility or the Vindome warehouse. This allows transparent and traceable information between buyers thanks to the latest generation of information storage technology. The tag contains a registration number with information regarding the contents of the case and transaction history.
This information can be viewed by scanning the tag with a smartphone. The phone’s Bluetooth function will activate the NFC microchip, so the app can access its blockchain record.
Advances in technology have made life easier for traditional investments as well as collectables too. Exponential growth has allowed transactions on both the stock market and wine market to be made from the comfort of your smartphone, while online sales of wine have skyrocketed, due in part to the lockdown of 2020.
Other new methods such as NFTs, QR codes and blockchain have not only revolutionised the way we invest in fine wine but provide plenty of background information including past market performance, professional ratings as well as lots of other useful data that will help you to go from hobby sommelier to savvy investor in just a few clicks. This level of certitude and detail is golden whether you’re investing $100 or $100,000.
Is investing in collectables risky?
Yes, fraud can be an issue with some wines, particularly those that are high on the auction house’s lists of unicorns. But if do your homework and use a trusted app that guarantees provenance, it does not need to be.
Another issue that can sometimes be a stumbling point for investors new to the wine trading industry is the lack of dividends. Traditional investments such as stocks and shares offer the investor both a yearly income stream as well as increase in value – so why put your money away in wine?
One reason only, but it’s a big one. Stocks can – and do – go down as well as up. No one wants to mention the annus horribilis of 2008, then 2020 but these years are prime examples that for every 2017, which saw the Dow Jone blasting through its milestone of 20,000 to 24,000, there is a 2018, where Bitcoin price peaked on 17 Dec 2017, then fell 45% on 22nd Dec 2017. The knock-on effect was that the Dow Jones fell 18.78% during roughly the same period.
As fine wine prices are affected by supply and demand and their (literal) liquidity, they have a negligible correlation to global stock prices. Wine as an investment is therefore the perfect answer – the risk is substantially lower than for investments in the stock market. Since 2004, wine has yielded a return of almost 250%, whereas, over the same period the stock market showed returns of less than 130%.
There are of course other collectables that make sense. But, while art still remains at the top of alternative investments (along with watches), there is more risk involved: you need a far bigger budget to start with, the market is notoriously tricky and fraught with contraband and it is impossible to invest autonomously. Picasso or Petrus? We know where we’re putting our money.
Should I invest in collectables?
If you are still considering collectables, then contemplate this: a 1947 Cheval Blanc would have cost a few francs at the time. The estate undersold the wine due to challenging meteorological and post-war conditions. Extreme heat threatened to damage the crop and while many other local growers used ice to cool their wine, Cheval refused to do so.
In the end, it was spared the worst of the blistering heat due to the vineyard’s favourable location, which was slightly cooler than the surrounding vineyards. This turned out to be arguably one of the best years for the Bordeaux fine wine estate.
Today, the wine is not only one of the most searched for on the internet and secondary market but the rarity will continue to increase its price. In 2010, Christie’s sold a six-litre bottle of Cheval Blanc 1947 for US$304,375. When, and indeed if, this wine ever comes up for resale, the auction house fully expects the price to at least double. What a difference ¾ of a century makes.
Still uncertain? Learn all the pros and cons of how to invest in wine in our detailed blog.