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Thursday, April 15, 2010
If you’re interested in investing in wine you’ve probably heard tales of long forgotten bottles fetching thousands at auction. While the chances of finding a dusty bottle of Chateau Lafite 1787 in your garage is pretty slim, the possibility of making some money from smart investment strategies is a much more likely scenario. With typical returns of between 10% - 15% a year on the best bottles, investing in wine has become a tempting alternative to traditional stocks and shares.
Like all other forms of investment though, there are risks to weigh up. Here are a few things to consider before taking the plunge.
Choosing a wine.
Some wines are better suited for investments, You need to keep this in mind when choosing your assets. Keep an eye out for wines that tick the following boxes:
- A well known brand or label that is known for producing quality wines.
- Has a history of high to very high prices.
- Is from a good vintage.
- Has received praise or high regard from critics.
- Sufficient demand of past vintages.
- Has the ability to age well.
Do your research.
You should never invest without doing thorough research first. Read books, magazines and expert opinions to get an idea of the market. If you’re interested in researching online, a great place to start is Liv-ex (the London International Vintners Exchange). This website keeps track of wine market developments and regularly publishes a price index of the world’s top 500 wines.
It’s not about making a quick buck.
Wine is a long term investment. The majority of vintages gain value as they mature, so it makes sense to hold investment wines for as long as possible. The more time that passes, the scarcer the supply, which in turn increases demand.
If you’re not sure, consider Bordeaux.
Experts consider the safest investments are wines from Bordeaux. Wines from this region represent more than 90% of the investment market. First Growth châteaux like Lafite Rothschild, Mouton Rothschild, Latour, Margaux and Haut Brion are extremely popular with investors because of their reputation and consistent high quality. The best Bordeaux vintages include 1959, 1961, 1982, 1986, 1989, 1990 1996, 2000 and 2005.
Australian wines to watch out for.
Two of the most popular Australian wines among investors are Henschke Hill of Grace and Penfolds Grange. In fact a single bottle of the original Penfolds vintage (1951) fetched just over $50,000 in 2004. Both of these South Australian Shirazes are highly sought after and prized additions to any investment collection.
Know the risks
Despite wine being resilient, its value can decrease just like any other asset class. Never go into an investment blindly and never invest more than you can afford to lose.
Storage is a factor.
A well maintained cellar is a pre-requisite for any wine investor. Wines that are being stored as investments must be able to mature as expected in order to increase in value. The optimum conditions for a wine cellar are:
- a constant temperature of between 14˚C - 18˚C
- humidity kept between 65% - 75%
- minimal light
- no vibration or movement
- low ventilation
Generally investment wines are kept offsite in purpose built storage facilities, though if you have a smaller collection, and the right conditions, you may be able to cellar them yourself.
Wine is a passion investment and the people that have the greatest success are the ones who truly love it. If you’re keen to get involved, start small and learn as much as you can as you go. And remember - unlike stocks and shares - you can always drink an underperforming asset!
