Investment in wine. Profitable business or expensive hobby?
As wine ages, it improves in quality, and becomes rarer as it is consumed. Both cases increase the price. Not only collectors and gourmets, but also investors are well aware of this now. No matter how frivolous it may sound at first glance, wine has been one of the most effective assets in recent years. Of course, not every purchased bottle from a supermarket becomes an investment instrument.
In recent years, the number of alternative investments has increased dramatically. This is largely due to the uncertainty caused by the impact of the COVID-19 pandemic on the economy as a whole and traditional asset classes. A recent survey of investors by Goldman Sachs showed that 60% of respondents plan to increase the share of private assets, which may include alternative investments such as wine.
How to invest in wine
There are many ways to invest in wine. But the main two are investing in companies that produce or sell wine, and purchasing bottles. This is the most common and potentially profitable way.
To successfully invest in wine, you need to understand. The most popular landmarks are the London International Vintners' Exchange (Liv-ex), and a set of its indexes. For example, the base index Liv-ex Fine Wine 100 tracks the 100 most sought-after wines in the world.
In addition, there are services such as Vint or Vinovest. They provide wine investment options for those who would like to try wine activities without significant upfront capital.
These companies greatly simplify the process for the investor. In addition, as a rule, they additionally provide services for storage, insurance and other related services.
As is the case with fine arts, investments in wine are usually designed for the medium and long term.
The best indicators of a wine's current and future value are ratings and rarity. Wine critics rate wines on a scale of 1 to 100. Wines with a rating of around 95 are considered high quality.
Scarcity is harder to predict. If wines that are already in limited supply are easy enough to identify, then it is more difficult to determine which wines will be missed later. To do this, it is recommended to research the wineries of interest for past price changes. Prices for thousands of different wines can be tracked at Vinfolio.com
Storage and insurance
Preservation of wine in optimal commercial quality requires special conditions. And a safe deposit box won't help here. We need a wine cellar — a dark room with optimal temperature and humidity.
Suitable for wine cellars are not available in every region. An alternative is a wine cooler. The price of this special device for a large collection can cost thousands of dollars.
And in the case of a cellar and a refrigerator, considerable space is required. Refrigerators also require, as a rule, considerable energy costs.
Expensive wines are considered precious and can be insured. But the conditions of insurance, including in what cases compensation of the cost of the collection is due, must be discussed with the insurance company. It is unlikely that they will agree to payments if you accidentally drink your investment yourself.