Your first thought when considering investing is probably of the stock market. Buying stocks and shares low, selling them high, attempting to make money from currency fluctuations or maybe investing in some gold. The one thing that you probably do not think about is wine.
A quality wine will get better with age and will also increase in price. There have been several significant studies of wine returns over the course of the twentieth century. The University of Cambridge conducted specific research into the price of wine using data from 1899 to 2012. The study found that the profit which could have been made on wine price increases over this period were very similar to stock market returns during the same period. Wine was shown to be a better investment than government bonds and without the usually risks associated with the stock market.
The main findings from this huge research project are as follows:
Even the years which have created poorer yields of wine and correspondingly lower prices will generate the same returns in fifty years as the high quality vintage wines. The 2013 campaign by Bordeaux en primeur proved this to be true. We would love a taste from a bottle of Mouton Rothschild, although some investors see fine wine as business. They don’t like to get all emotional and start drinking their product instead of selling it to the highest bidder.
Age is the most important factor
A high quality vintage wine will increase in price much more rapidly than the lower quality wine will during the same period. However, it can be difficult to know when a high quality vintage wine has fully matured and therefore when the optimum price has been reached. Lower quality vintages tend to appreciate slowly at first but then gather pace much quicker than the high quality wines. This potentially makes them a better investment long term.
A bad year for a high quality wine will result in a poor quality wine with a low price tag. This means that it is quickly bought and either sold on, or more likely, consumed. The result is that just a few years after a poor vintage has been produced there will be very few of them left on the market and the price will sky rocket accordingly. A poor vintage can actually be a better investment than a high quality one.
More than just investing
Investing in wine is as much a hobby as an investment. It can be fun to sample the various different offerings and choose the ones you think will perform best and will sit comfortably in your cellar for years to come. You can also learn about the different wines, how they are produced and what makes them so special. This makes wine investing financially worthwhile and interesting to do. That can rarely be said of the stock market!
Investing by chance
Many people become wine investors through a love of wine. Learning about wine ensures you have the knowledge to purchase good quality wines. This is a skill which is acquired over a period of time. Once you know which ones are good wines it is likely you will collect a few of them and not wish to open them because you know how valuable an asset they are. From there it is a small step to start collecting properly and start monitoring the annual return you can achieve from these wines.
It is not all fun and games. Wine investing is a serious business and the wine must be stored correctly to ensure it both ages well and survives the aging process. Amongst other things wine likes to be in a cool, dark place and preferably remain at a fairly consistent temperature without any oxygen entering the bottle. If you don’t own a cellar, have your product stored in a specialized facility. This way, you are sure that experts are preserving the bottles in excellent conditions.
Investing is wine is also comparatively cheap compared to many other forms of asset investment – such as houses. Approximately $20,000 will get you started with a reasonable amount of quality Bordeaux; a wine which should do better than most other forms of investment.