As an investment, fine wine has been on the rise since 2016, with the most lucrative brand increasing in value by 165% over five years according to The Telegraph. However, as the paper also notes, this demand, along with the demand from overseas buyers taking advantage of the weak British currency, has in turn driven up the price of initial investments.
Investing in wine has long been one of the most popular passion investments, which is effectively another way of describing lucrative hobbies. Yet, like any investment which is on the up, there is every chance the bubble could burst at any time, leaving you with little more than a cellarful of once-expensive plonk. Here, we’ll explore the pros and cons of splashing out on fine wine as a long term investment.
Pro: Fine wine is a reliable earner
As noted above, the most hotly sought-after fine wines have made some considerable gains in value over the last few years. Not only are individual bottles and brands doing well for investors, but the sector as a whole has been on the rise for nearly twenty years. As The Gentleman’s Journal notes, fine wine “outperformed 98% of investment-grade asset classes” since 1999.
The fine wine industry has exploded to the point where it now has its own trading index—the Liv-ex 100—which was founded at the turn of the millennium. As Barron’s notes, the benchmark traded throughout 2018 inside a 2% range, showing just how little the market fluctuated for the worse. Liv-ex also allows prospective investors to determine which types of wine are worth the money, particularly when it comes to their region of origin.
Con: Fine wine investment scams are a common threat
All too often, with high value investment opportunities comes opportunists looking to make a quick buck on a rising trend, and fine wine investment is no exception. Primarily taking the form of “high-pressure cold-calling” operations, these bogus companies do their trade over the phone, promising high returns which the investors never see.
Anyone looking to invest in or sell fine wine should make sure to do thorough research on any wine broker they contact. Ensure that the entire process is laid out transparently, and that a wine broker will gladly answer any questions you may have. Look for online reviews of your broker of choice via sites like Trustpilot, and shop around to get the best quote for your wine. Brokers like The London Wine Cellar point out that for anyone selling wine, a personal, expert service is critical, and you should not expect to be rushed or pressured into parting with your cellar on terms you don’t feel comfortable with.
What you should do as an interested investor
The most critical thing to do if you’re considering investing in, or selling, wine is your own due diligence. It isn’t just the brokers you should be taking the time to do deeper research into, but the wines themselves. Whilst there is an obvious upside to investing in wine that you actually enjoy drinking, the taste of any vintage will pale in comparison to how much you could stand to make from it as an investment.
Look into what types of wine are either currently rising or riding high on Liv-ex. As Investors Chronicle notes, wines from the Burgundy region made up 80% of Christie’s biggest sellers at auction. Similarly, one wine broker recently told This Is Money the key thing to look for from an investment wine is “low yield…a good or great vintage, and generally [it should be] from a prestigious property”. Still, as with any investment, you should be prepared to be patient when it comes to waiting for a return. The same broker also points out that investment wines have “a lifespan of 10 to 20 years” at least, so if you’re looking to turn a quick profit, fine wine investment may not be for you.
However, if you’re happy to wait your investment out, and are looking for an easy starter investment asset, fine wine is the ideal starting point. Bottoms up!
