With the development of economy, investment grade wine has become a new way of investment for investors around the world. The soaring price of fine wine provides investors with considerable capital gains. This article will focus on investment grade wine and explain how to invest in fine wines and what are the key factors affecting wine investment.
Wine investment funds open up wine investment market
The emergence of wine investment funds greatly reduces the threshold for investing in fine wines. In the past, investors need to have professional knowledge about wines and directly contact wineries and wine merchants. Now, wine investment funds handle everything from sourcing, authentication, storage to sales of fine wines. Investors simply need to invest certain amount of money into the fund and then can benefit from the price appreciation of fine wines. Many reputable wine investment funds have average annual returns ranging from 10% to 15%.
Storage and provenance determine wine investment value
Proper long term storage is crucial for fine wines to maintain and increase their value. The storage condition must be optimal – constant appropriate temperature, humidity level, ventilation and light exposure. Any mishandling or faulty storage can significantly depreciate a fine wine. The provenance documents the storage and ownership history of a wine. Wines with impeccable provenance command much higher prices than those without.
Investment grade wines appreciate most in value
Not all wines have investment value. Only certain prestigious regions and renowned producers make investment grade wines. Generally they need to have long established track record of consistently producing high quality wines that are sought after by critics and collectors. The most popular investment wines are categorized as ‘investment grade’ such as top Bordeaux, Burgundy, Champagne, Italian wines. Their limited production and strong demands lead to higher appreciation in value.
Economic trends influence fine wine prices
The fine wine market does not exist in isolation. It is affected by overall economy environment and investor sentiment. When economy is strong, stock market is bullish, more discretionary income flows into alternative assets like fine wines. On the contrary, during recessions and downturns, fine wine market activities decline as investors become more risk averse. Understanding these macro economic trends help make informed decisions.
Know your investment goals and risk tolerance
As with any other investment asset, it is important to understand your investment goals and risk tolerance before investing in wines. Wine investment has inherent risks like counterfeit bottles and price volatility. Do proper research to decide which investment grade wines match your goals – capital preservation, moderate growth or aggressive appreciation. Allocate only reasonable portion of your portfolio into wine investment.
In summary, investing in fine wines can provide portfolio diversification and decent long term returns. However, proper due diligence on wine investment funds, adequate understanding of the fine wine market dynamics and risks are indispensable for success.