Investing in wine can be risky, there’s no doubt. Some investors probably wish they had stayed with more traditional investment options. On the other hand, in recent years, there have been times when wine investments appreciated, while other assets were in a decline. Sophisticated investors who know what they’re doing can use wine as a good way to diversify their portfolio.
When you’re in love with wine and you are also a drinker, you don’t look at the money. It is an investment, yet wine lovers are more interesting in the product itself. Whether you’re a starting entrepreneur, a powerful CEO or someone who’s just looking for a smart investment opportunity, it’s important to have one thing in mind: you can always drink the wine if you cannot make profit, so it’s still a win.
For those with money to spare, here are some tips to help you make a sensible investment in fine wine.
Do business with a serious company
Never buy wine from anybody who cold calls you, or sends you an unsolicited offer via the mail. At best, these probably aren’t a good deal, and at worst, they could be scams. Also, make sure that the company you choose has outlined specific investment criteria that they use. They should talk about investment grade wines and the chateaux they purchase. If they talk about investing in wine as “fun” or “drinkable,” then look elsewhere.
Wine lover or wine investor?
Be both. Although you love wine and you have money to spare, this doesn’t mean it’s not an investment. It is, and it’s your duty to protect it. Purchase wines from authorized buyers, check their reputation, and look for reviews and so on. Don’t take any unnecessary risks. Many people fail in this industry because they’re too attached to the wine. As tempting as it can be to purchase a rare bottle of wine, you should never go with your gut. Ask for advice, get informed, and perform a thorough analysis of the market to be 100% sure you’re doing the right thing.
Understand the risks
Wine investments are more risky than some other options like unit trusts, gold, art, or investment trusts. Even when you are working with a reputable wine company, there will be risks. If you see a firm that promises “risk free” or “guaranteed returns,” don’t believe it.
See for yourself
Your wine company should have a real office, not just a post office box and answering service. If it’s not too far from you, can you visit their office and see for yourself? This will tell you a lot about the company you’re dealing with. Also, check out their experience and their wine investment track record.
Think about liquidity
At some point you will want to sell your wine. The more liquid your investment, the easier this will be to do when the time comes. The easiest wines to sell will be those from the top chateaux in Bordeaux. Your liquidity goes down and risk goes up when you invest in lesser known wines, en primeur wines, wines in non-standard bottles, and wines more than 25 years old.
Ensure proper storage
The wine company that you work with should physically take possession of the wines that they purchase, and then have them stored in a bonded warehouse that is government approved. Climate controlled storage is crucial in order to avoid damaging your investment. See if you can visit the warehouse, and actually view the wine in person.
Make sure you get an independent valuation of your investment from a reputable source. Whether a company is holding wine for you personally, or you bought it through a fund, you should receive regular reports on the value. The best source for wine valuations is Liv-ex, the fine wine exchange. You should also check the websites of reputable wine experts, just to keep an eye on the market and stay updated with the latest changes.
Sometimes, bad things happen. Wine bottles can break when being transported. Wine can be damaged by improper handling or storage, or due to a problem at the warehouse. Theft of valuable wine is another potential problem. Your wine investments should be insured for full replacement value to protect you in case of accidents or theft.