Fine wines have registered a strong start this year in the investment market. Heightened demand and short supply are creating price hikes and trading volumes are at a peak. We say if there was ever a right time to invest in wine, it is now.
Fine wine presents an attractive investment option
As an alternative investment, fine wine is an attractive asset. It has traditionally outperformed global equities, ETFs, and real estate investments. The key principle here is that the value of fine wine appreciates over time as its quality improves and availability dwindles. Being a tangible asset with an inherent value (you can drink the wine if you can’t sell it), it has no correlation with the volatility of the traditional stock market.
The stock market is influenced by factors like company earnings, corporate reputation, governance, management, and interest rates. Whereas fine wine prices are based on annual yields, weather conditions, and consumer tastes. As such, traditional market indicators like recession or inflation have little impact on the investment potential of fine wine. This low-risk characteristic makes it a stable investment option even in times of economic instability.
The trick is to invest in wines that are scarce, age-worthy, come from a premium brand, have a strong vintage and a critic score of 95% or higher. When stored under optimum conditions for an adequate period of time, such wines will appreciate in value and deliver stable long-term growth. After a period of five years or so, you should be able to eventually sell them at a significant profit.
The consistent market performance of fine wine
Over the last 15 years, the fine wine investment market has offered annualized returns of 13.6%. It has outperformed other alternative investment assets like luxury handbags and blue-chip art, appreciating 127% over the past decade. We expect the performance streak to continue long into the future.
Even during the last two years, despite the economic turmoil caused by COVID-19, fine wine has beaten commodities like gold and crude oil and the Dow Jones with a whopping return of 25.68%. According to Liv-Ex, the top 100 fine wines have appreciated in value over these past two years based on individual transactions. Top vintages from Burgundy and Champagne regions have gone up in value more than the index.
There are also other factors at play. The US has abolished tariffs on wine imports from Europe, setting the stage for heavy investments from US buyers. Fine wine collecting and investing services are helping people – buyers and investors, beginners and veterans –invest in wines with ease and efficiency.
Fine wine is anyway an artisanal product and is produced in limited quantities. Consider that every time a rare vintage is consumed, the remaining bottles get a boost in value. With emerging markets like Asia, Africa, and Latin America developing a taste for fine wines, demand is even more on the rise. On the other hand, climate change is steadily encroaching upon several wine regions, pushing their yields into the endangered and must-have lists.
The future of the wine investment market is bright
The future of fine wine investment is bright. The industry is keeping pace with the times and has already joined the NFT race. As far as alternative investments go, it does not get better than this. Experts agree that NFTs can help combat frauds in the sale of fine wines and open up interesting avenues for next – generation investors. As an example, the Flavien Darius Pommier vineyard in Bordeaux sold digital images of their wine bottles with a hefty £300 price tag, using NFTs to link the images to each vintage. Château Angélus sold a 3D digital artwork NFT linked to the ownership of a barrel of their 2020 vintage.
Alternative investment advisers suggest there’s no time to invest in fine wines than the present and market insights support the idea. A relatively efficient secondary market, standardised trading platforms such as the Liv-Ex, and wine investment services have helped make the fine wine market more transparent and better organised than ever before. Market entry has become effortless for new investors, trade efficiency has increased, and investment risk has gone down.
In the age of NFTs and cryptocurrencies, you can’t afford to miss out on alternative investment options. If you have an interest in fine wine, it may be the right choice and right time for you to invest in some.
