Have you ever thought about why people invest in the first place? And we are not talking only about the wine business here; it can be any kind of investment. The core purpose of any investment is the prospect of the increasing value of a particular asset over time. And as the saying goes: “aging like a fine wine”, aging is one of the ways to enhance the taste of a wine. As there is no shortage of wine connoisseurs who appreciate a finely aged wine, buying a bottle of wine and storing it for years can increase the value of that wine. And that’s where the concept of wine investment comes from.
But don’t think of wine investment as a way out of your league just because you don’t consider yourself wealthy like the vineyard owners. Wine investment can be an interesting addition to your investment portfolio, and it is fairly simpler than investing in bonds and stocks. Read on to learn more about wine investment.
The Wine Investment Realm Is As Intricate As the Stock Market
Wine investment might not be as lucrative as investing in stocks and bonds, but it is also not just a hobby for cash-rich people. There are services dedicated to analyzing pricing, market trends, and coordinating the exchange of investment wine. Buying wine from the secondary market has grown in popularity; from 2000 to 2018, it has grown to almost 4 billion. Wine investment depends on different auctions for the trading. Apart from the auction, you can invest in a vineyard such as Rhone valley vineyards or other vineyards in France.
1. Wine Is a Limited Resource like Precious Metals
You might think investing in wine will not be as profitable as other traditional investments; after all, you can increase the production any time you want. And this certainly will not sit well with the value of the product. But, once you bottle wine of a particular season, you can never bring back the same taste or quality from the next seasons’ production.
Wine production largely depends on seasonality, and climate but once the season is gone you can not expect an exact rendition of a similar product. Every batch of wine tastes different, even if it comes from the same vineyard, and only a veteran wine tester can detect the difference.
And that should resolve your doubt that wine has endless production and that will reduce its value. Once you buy a particular wine and store it, you can rest assured that a particular edition of wine is never coming back; just like a vintage record.
2. Research Is the Key
Having a taste bud of a wine critic is not all that is required in wine investment. It is intricate, and you have to understand many factors about production, storage, and buyers’ preferences. For instance, over 60% of all investment wine comes from the Bordeaux region of France. Bordeaux has unique red clay soil conditions that produce stellar red wines, appreciated by critics all around the world.
And if the wine you are buying is not from Bordeaux, Burgundy, Tuscan, and Napa valley or other highly sought after region, you better drink that yourself than considering it as an investment.
There is also the factor of aging and the type of wine. While fine champagnes take 60 years to age well, port and fortified wine take over a hundred years to age perfectly. And the more rare or limited the edition is, the more expensive it will be. So make sure to do your homework before you take up wine investment.
3. Don’t Invest Beyond Your Ability
Like gold or other investment, you shouldn’t bite more than you can chew in wine investment. As you might have guessed, it requires years for it to be profitable, and make sure you are in for a long run. Before making a big investment, consider the pros and cons and the future prospects of that particular wine. And in no way you should buy something on a whim or even being influenced by word of the mouth.
Investing can be very diverse, with $10000 you can either buy just one bottle of vintage wine or a case full of mediocre wine; the choice is yours. And don’t fool yourself that there is no risk associated with wine investment; it takes only one poor harvesting season or natural disaster to raise the price and to throw your calculation into turmoil. To shield yourself from these potential risks, you might consider insurance for your investment wine.
4. You Need To Have a Proper Wine Storage
The aging of wine depends on how well you store it. And no, your regular wine cooler might not cut it if you are serious about wine investment. Consult with a professional to build wine storage that is temperature and climate-controlled. If the investment wines are stored poorly it will affect the taste and price of the wines. So consider building proper wine storage as a part of your investment for future profit.
5. You Need to Connect With Other Wine Investors
Wine investors generally take part in various auctions to trade or exchange their investment wines. And wine investment doesn’t mean you are going to buy any bottle of wine and come up as a winner 10 to 20 years down the road. There are thousands of vineyards making wine and only about hundreds of them can produce investment-worthy wine.
So you need to tune into the wine investors grapevine to learn about potential good wine or auctions. And before you dip your feet into wine investment, make sure you have a reliable channel that you can trust and depend on. Besides, networking with other investors is the best way to go for it.
6. Decide How Seriously You Are Taking This Wine Investment
There are two ways to go for wine investment- one is to be a dedicated investor, and the other is to be a part-time investor, taking up wine investment as a hobby. You should decide early on, how seriously you are about wine investment. If you are thinking of it as your primary source of income, you might consider even buying a vineyard or investing in one. While the price of buying a vineyard might seem high, if you are ready to put in the effort, it will be worth the price.
The Bottom Line
Wine investment might look like a sophisticated or even an eccentric investment to you. After all, you might only know about the wine business or winery to be the luxury villa and vineyard in some region of France, owned by some elite. Anything beyond that might not be in your mind. But wine investment is more than the luxury or display of wealth by the elites. It can be an exceptional investment alternative for you. It can work to shield you against market volatility and reduce the risk on your overall investment portfolio. Needless to say, wine investment will add a nice balance to your portfolio. However, before you jump into wine investment, you have to know your wine.