Fine wine as an investment is on the up. The economic turbulence of 2020 reminded us that stocks and shares are notoriously volatile, even more so in the times of an (unforeseen) global pandemic. Yet, one clear winner has emerged on the top of savvy investors lists; an asset that offers stability and provides very decent year-on-year returns. In the recent state of flux, fine wine has remained solid.
Why Invest in Wine?
When we think of alternative investments, we tend to think of the obvious: art, watches, jewellery, cars, even handbags. Yet, those who choose to invest in wine have come up smelling of roses over the past 20 years. Not only is it a sexy addition to your portfolio, the chances are you love a glass of the good stuff and if you can make a little moolah on the side then why not?
Is Wine a Good Investment?
Ok, so this is the $64,000,000 question. Or rather, in the case of the 1945 vintage of Romanée-Conti sold at Sotheby’s in 2018, it’s the $558,000 question. Yes, that right, a single bottle of the rare French Burgundy sold at 17 times its estimation price to one lucky buyer. So, if you were the owner of the bottle, we think you can safely say that yes, it’s an asset that provides pretty good returns.
Wine Compared to Other Alternative Investments
When it comes to investing in something you love and will make you money, fine wine is considered a passion asset, coming second only to art. Collectibles such as gold and jewellery, antiques or cars have long topped the list of alternative investments, but we have seen a surge of interest in wine as an investment over the last 20 years.
Traditionally, stocks and shares have been the first choice for those with a little extra cash to spare. However, the risk factor with the stock market is not negligible – think of the 2008 crash, followed by a decade of ups and downs, only to plummet again after Covid in 2020.
As fine wine prices are affected by supply and demand and their (literal) liquidity, they have 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%1, whereas, over the same period the stock market showed returns of less than 130%2. And while art still remains the top of alternative investments, 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.
If you do want to invest in wine then you need to know that it is not just about consumption. You don’t even need to be a true oenophile to understand the market – but you do need specialist knowledge to get it right. Vindome’s app makes your wine investment journey easy, offering not only a friendly user experience but peace of mind.
Wine Investment Stats & Pros
Here comes the science bit. Even if you have decided with your heart that wine investment is the way forward, no savvy saver is going to splash their cash without doing a little research first. If you still don’t believe us, then why not let the numbers do the talking:
According to wine investment guru guide Liv-Ex, 28% of high net worth individuals have a wine collection, and that 2% of their wealth is tied up in wine. Warren Buffet has even gone on record saying that at least 1% of your wealth should be invested in wine, regardless of your net worth. Forbes magazine states that: if you had invested $100 in the fine wine market in 1952, your investment would now be worth $420,000. On the other hand, $100 invested in the stock market would now be worth a modest $100,000. Let’s do the math – that’s a massive 419,900% increase vs. a “measly” 99,900%. Thanks to this impressive track record, the majority of financial advisors would support investing in fine wine as a way to diversify certain client portfolios.9
First Growths (Premiere Crus) from Bordeaux are notably the most popular and perhaps those with the lowest risk level, although highest entry point. The superb age-ability of these wines – plus 50 years in most cases – makes them one of the finest wine investments there is. That’s assuming you have deep pockets to start with, as the average starting price en primeur for a first growth is upwards of €300. ROI however can be as much as 30% in six months so understand that if you pay your money now, you will likely reap rewards in the not too distant future.
If that seems a little steep, then a smart alternative is to look at second wines: these showed a 17.6% increase in 2017 compared to just 5.5% on their relative First Growths. However, aging is less predictable in these second growths, so you need to know when to sell in order to glean any returns.
Producers are keen to cash in on their label’s success too, doing everything they can to push up a particular wine’s value. The label of the 2008 vintage of Lafitte Rothschild carried the Chinese symbol for the number 8, an auspicious number in Asian culture. This caused a huge surge in the Asian market (which was already beginning to boom), and made that vintage a collector’s item in the Asia Pacific region. Other brands too know how to manipulate the market: be on the lookout for when producers change their oenologists, if an artist draws the label or if it is an anniversary year of the producer. All these little additions and quirks that get added to the label quickly push the price up, often regardless of what’s inside.
Wine Investment Cons
The beauty of wine as an investment is that the usual downfalls are not valid – platforms such as Vindome track the provenance of all their wine and subject each bottle to rigorous authentication prior to being released to the public. But before you go rushing off and blowing all your savings on a six-litre Imperial of 1961 Cheval Blanc (valued at between US$150,000-$200,000, but sold for $304,375), there are a couple of things that you need to know.
- Correct Storage Is Essential
You would never leave your vintage Ferrari Testa Rossa parked on the street now, would you? The same goes for your bottles of fine wine. These are potentially very valuable items so you need to make sure that you are correctly storing and insuring them. Vindome offers temperature controlled state of the art storage solutions and evaluates the market on a month by month basis, making sure your wine is always insured at its real time value.
- It Can Be Expensive
The focus here is on the can. Yes, there are some bottles that reach astronomic sums but those are only a drop in the glass. Vindome has starter collection packs from just €150, which offer a perfect entry point for those who want to begin their wine investment journey.
- It Is A Waiting Game
With the exception of perhaps the futures (en-primeur) market, no wine is going to yield jumbo returns short term. Be prepared to be patient, and hopefully you’ll reap rewards when the time is right. We always give a wine investment horizon when purchasing wine with Vindome, allowing you to plan your financial future; short term is 2-5 years, medium term is 5-9 years and long term +9 years.
- It’s Not An Exact Science
It’s worth remembering that predictions are just that: an educated guess at what will happen in the future. Unfortunately, none of us have a crystal ball and wine is notoriously fickle; dependent on ageability, weather, harvesting, vinification as well as many other variables. Past history is of course an excellent indicator how a wine will perform over time but it’s not failsafe – just like all elite things, one good year does not guarantee the next.
How to Invest in Wine
Choose Between Different Wine Exchange Platforms
Over the past year, we have noticed more and more peer to peer wine exchange platforms are popping up. This is far more than a trend; the convenience, speed and low commissions make these user friendly platforms very enticing.
However, you’ll need to look out for some pitfalls; some of these platforms have hidden fees, don’t offer storage and insurance options or don’t offer en primeur, where traditionally the fastest returns can be made. Some don’t offer wine guides meaning that you’ll need to do your homework or reach out to a third party for advice (thereby negating the very point of using a wine exchange app). You will also need to use a source that is reliable and where you know that your transaction is safe; look out for companies that offer NFC tags and track their sales with blockchain (thereby ensuring anonymity if needed).
Educate Yourself on the Wine You Choose for Your Portfolio
Once you have decided that you want to join the ranks of wine investors, it is worth educating yourself on what’s hot and what’s not. The wonderful thing about passion assets is that you can invest in what you love, as a bottle of something great gives far more pleasure than a spreadsheet of stocks and shares. Yet, in order to make an informed decision, it is important to understand the chateaux’s history, methodology and recent performance.
That’s where Vindome’s extensive wine guides come in. A detailed description of each wine available on our Live Market is available here, meaning you can educate yourself on your chosen investment wines. From big, bold Bordeaux’s to amazing Argentinians, we have it all covered.
Learn How to Use the Chosen Wine Exchange Platform
The beauty of a fine wine exchange platform is that as it is a relatively recent idea, the technology is – in most cases – cutting edge. This ensures a smooth user experience, with many apps not even requiring you to log in in order to browse the live market. In other cases you simply need to create an account, add your details and hey presto – you’re a fine wine trader.
Wine Investment Resources
Must-read resources before you start investing in wine:
- Is Wine an Asset
- Wine Investment Terms
- What Is En Primeur
- How to Sell Your Wine
- Wine Investment Trends
- Wine Investment During Inflation
- Tokenization and Wine Investment
Resources to choose wines to invest in:
Resources for investors:
Learn more about Vindome – your innovative wine investment app.