Drinking wine has been a pastime for thousands of years and it remains an incredibly popular drink. But today it has also developed into something else: an investment.
There are now a number of people who will invest in wine for its potential to appreciate with time, allowing the owners to sell at a profit. Generally, as wine starts to age it becomes more coveted by the market, pushing its value higher (note that this only works with certain kinds of wines, your two-buck-Chuck will not fall under this category) [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].
It may seem like a strange investment to some, but to the connoisseurs out there, wine has quickly become a lucrative investing option. The idea behind wine investing started with individuals growing weary of volatile stock markets and the price drivers that can tinker with one’s portfolio. Wine remains almost entirely separate from financial markets and will always be in demand all over the world. Whether it’s with a nice meal or just a relaxing evening, enjoying a glass of wine is a global phenomenon and the most savvy investors have found a way to cash in on this trend.
Wine Investing: Advantages and Disadvantages
There are a number of pros and cons when it comes to placing your capital in a nice bottle of wine. Starting with the pros, one of the biggest draws to this asset is the fact that there is no underlying financial market to tinker with prices. There will never be a bad trade or a flash crash that will suddenly erase the value of your investment. Another big plus is the fact that you will physically own the bottle(s), meaning that you can ensure their proper care and storage as opposed to placing your money with a broker or financial advisor. Wine also has the potential to appreciate with time. Though it is not a guarantee, as wine ages it often becomes more valuable; a well-aged wine is a highly sought-after asset among serious collectors.
The disadvantages of wine start with its liquidity (no pun intended). It’s not as if you can walk up to your computer and simply sell your bottle of wine within seconds; moving a nice bottle takes time and effort, a luxury that not everyone has. Along those lines, learning about wine and getting a firm understanding of the industry is another major time commitment as there a number of nuances to grasp and things to watch out for, such as counterfeit bottles. Another major disadvantage is ensuring the safe storage of your wine; improper caring for a bottle can not only destroy its contents but also its value.
The Most Expensive Wines
Still not sold on how a bottle of fermented grapes can be worth a lot of money? Check out the following list of some of the most expensive wines in the world:
- Henri Jayer Richebourg Grand Cru: This wine comes from Cote de Nuits in France where the average bottle goes for $15,185. These bottles have even sold for as much as $47,059.74.
- Domaine de la Romanee-Conti Romanee-Conti Grand Cru: Hailing from the same French region, these bottles have an average price of $12,972 with a max of $188,336.
- Henri Jayer Cros Parantoux: Another French creation, the average bottle price for this wine falls at $8,665 with the max price topping out at $23,011.
- Domaine Leflaive Montrachet Grand Cru: You guessed it, another wine from France that fetches $5,505 for the average bottle with its price maxing out at $9,554.
- Egon Muller-Scharzhof Scharzhofberger Riesling Trockenbeerenauslese: If you hadn’t guessed from the name, this wine hails from Germany and averages $6,826 per bottle with a nice max price of $15,105.
Wine Investment Funds
For those who do not wish to actually invest in the wines themselves, or simply do not feel that they have the expertise to make a sound buy, there are a number of wine funds that allow investors to simply make a capital distribution in exchange for exposure to some of the best wines in the world [see also The Ten Commandments of Commodity Investing].
- Waterkmark Fine Wine: The fund raised equity capital from a group of enthusiastic high-net-worth investors under the Enterprise Investment Scheme (EIS) and is very well capitalized to receive generous tax reliefs available under EIS.
- Fine Wine Fund: Run by Wine Asset Managers LLP, this fund has an impressive track record to reel in investors. According to their website, the Fine Wine Fund has returned an average rate of 7.9% per annum net of all fees since its launch in September 2006. The firm offers two different products, one aimed for individuals and one aimed for institutional investors.
- Wine Source Fund: Backed by the Wine Source Group, a premier global merchant company, Wine Source Fund is regulated by the Malta Financial Services Authority (MFSA) and registered under the Alternative Investment Fund Manager’s Directive (AIFMD) of the European Union. The fund offers diversification with niche exposure to spirits such as Cognac and Whiskies.