How to start out in fine wine investment

How to start out in fine wine investment

In December 2021, Christie’s Finest and Rarest Wines and Spirits auction garnered sales worth a collective £7.6 million.

Among the wines on sale included Lot 544 – 11 bottles of Domaine de la Romanee-Conti 1971. The upper estimate for this lot was £180,000 but, in the event, it sold for £269,500. In short, there’s a lot of money to made from fine wine investment.

Has COVID-19 impacted fine wine investment?
Investing in fine wines has become even more popular since the arrival of the pandemic. It’s certainly an alternative asset class that offers much potential.

But with prices like these, does it mean that fine wine investment is out of the question for anyone who doesn’t already have huge amounts of money? Absolutely not.

The advance of technology and online platforms mean it’s absolutely feasible for newcomers to fine wine investing to get in on the act with just a few hundred pounds.

How much do you need to invest in fine wine?
Fine wine investment, of course, is an alternative asset class. As such, it’s not regulated by the Financial Conduct Authority (FCA) and it doesn’t come under the Financial Services Compensation protection scheme either.

Therefore, as a new investor to the fine wine marketplace, you need to ensure you’re only working with reputable platforms and businesses. As with all investments, only ever put in an amount you can afford to lose – all investments fluctuate.

While it’s absolutely viable to invest in fine wine with a relatively small initial stake, it’s also worth remembering that any storage costs must be offset against this stake.

Some fine wine asset management firms may only accept investors above a specific threshold, but this depends on the company.

Research the marketplace before making an investment decision
Some wine merchants offer cellar investment plans, which allow new investors to start their wine collection with assistance from a dedicated account manager.

The wines they invest in can either be stored for drinking or kept as a long-term investment. And while it’s up to the investor how much they pay into the scheme every month, the recommended amount is around £250. This means that it would work best as part of a broader portfolio of alternative asset classes.

While some experts insist that it’s possible to get started in fine wine investment for a relatively small initial amount, others argue that it needs to be a significant amount up front.

For example, the CEO of Cult Wines, Tom Gearing, maintains that it’s not possible to achieve risk adjusted returns from a wine portfolio without investing at least £10,000.

Ensure that your fine wine investment portfolio contains variety
Portfolio diversification is always the advice from investment experts, and it’s the same message when it comes to investing in fine wine. To get the maximum possible return, investors should ensure their portfolio consists of a wide variety of wines.

But there are ways to make decent returns without shelling out thousands. For example, you could invest in wines that fly under the radar. This means turning to Argentinean rather than Burgundy or Bordeaux.

By investing in wines from lesser-known regions, you stand to make higher returns. But it is higher risk, which is why it’s always a good idea to get some advice from an expert before you make your investment decision.

Be in it for the long-term to make the best returns
Another tactic familiar to investors in other asset classes is that you need to hold your nerve. Stressing about short-term losses isn’t the right way to go about making money from fine wine investment.

It can be volatile, and there is always the chance of price fluctuations. Prices and value of fine wines are determined by their supply and the demand for them.

The best time, therefore, to invest is when the supply is waning at the same as the demand is shooting up. In other words, the best approach to fine wine investment is a long-term approach. For example, if investors decide on a five-year schedule for their portfolios to go through the ups and downs of a typical investment cycle, then they can look to make the best returns. If they want to sell too soon because their panicking about market fluctuations, then they’re not going to make the returns that they should.

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