It has been a rough period of struggle for investment markets due to a series of disruptions in these recent years – from an ongoing pandemic to natural disasters, from political upheavals to humanitarian crises. Despite the overall rocky situation across the world, fine wine investments have managed to remain stable and are on the upswing.
During Q1 2022, for instance, the fine wine market retained a stable store of value amidst volatile spikes in the mainstream financial markets due to factors like the Russia-Ukraine conflict. Fine wine prices have been rising each month and the Liv-ex 1000 index has risen by 7.25%.
In fact, market intelligence suggests that the premiumization of wine will continue, with customers willing to shell out higher prices for quality vintages. Especially with the yields of several fine wine brands going down due to climate change, demand and prices are climbing to new heights and creating fortunes for smart investors.
Why should you invest in fine wine?
Fine wine is an attractive alternative asset. Since it is a tangible commodity with an inherent value, it can withstand stock market volatility and offer stable returns. Not only has it historically fared better than typical investments like equities and ETFs, but it has also outperformed other alternative investment assets like luxury handbags and fine art, gaining a 10.6% historical annual return over the last 15 years.
This low-risk characteristic is due to the fact that the value of fine wine appreciates with increasing age and decreasing availability, remaining more or less untouched by traditional economic indicators like recession or inflation.
What to know before you invest in wine
The key is to understand how wine valuation works and what factors affect a fine wine’s resale value in the investment market. It is preferable to invest in wines that have limited availability, are age-worthy, come from a premium brand, offer strong vintage, and have been highly rated by critics. Other factors to watch out for are provenance and storage, region, and OWC condition.
But if you are a first-time investor or are new to the market, aside from understanding wine valuation, there are some key decisions you should make before you take the plunge:-
- How much money are you willing to invest in wine?
Experts agree that £10,000 is a comfortable ballpark estimate that you can start with to build strong portfolios over time. In fact, with multiple options available now in the fine wine investment market – from stocks to NFTs –, it is possible to start quite small.
- How much time are you willing to lock your investment for?
Fine wines are medium to long investments and lack the liquidity of typical investments since wines escalate in value as they age. A period of five to ten years is usually required for optimal returns.
- How will you store your investment wines?
Fine wines have to be stored under careful conditions in special bonded facilities to preserve them in prime condition. Professional storage ensures that correct temperature and humidity conditions are maintained, storage conditions are secure, and may offer additional tax benefits.
- Will you buy insurance for your investment?
While dedicated storage facilities will offer safe storage, it is a good idea to ensure you have adequate insurance to safeguard your investment against unforeseen circumstances.
- How will you stay informed about market updates?
Unless you are immersed in the fine wine market, it is difficult to keep abreast of industry news, events, updates, and trends. However, these essential pieces of information can help you time your buying and selling to maximise your returns.
For this, you can subscribe to websites, newsletters, and blogs by experts, or you can consult a dedicated wine investment advisor. Professional fine wine collecting services can also help you invest in wines with ease and efficiency.
What are some wines you can invest in?
Wines from Bordeaux and Burgundy have traditionally dominated the investment market. Think French Grand Cru wines like DRC and Lafite-Rothschild. But the world of fine wines is opening up to other regions, which can provide a foundation for wider investments with stable long-term returns. In Q1 2022, the largest growths were registered by Burgundy and Champagne (14.62% and 9.55%, respectively), continuing their success from 2021.
New investment offerings do not end with Champagne or other French wines. Fine wines from Italy, investment wines from California, and new wines from Australia are all up in the market for investing. In fact, market analysis indicates that Italy and the U.S. are some of the biggest movers. Pick a Screaming Eagle from Napa Valley, a Brunello or Barolo from Italy, or a Penfolds from Australia and you will have started off your wine investment journey right!
