How to invest in wine?

How to start invest in wine?

Investments in wine are long-term investments, characterised by relatively high rates of return and low risk.

A desirable feature is their low correlation with financial markets, making them suitable for diversification of the portfolio of traditional financial instruments.

However, attention should be paid to high transaction costs, storage costs and insurance costs for purchased wine. The first way to invest in wine is to buy bottled wine. The wine is stored in certified cellars so that it does not lose its value.

Invest in wine barrels or funds

Another way is the investment en primeur, also called wine futures. It is based on the purchase of a wine aged in barrels of wine, before bottling.

On the basis of preliminary drink assessments and weather information it is possible to assess the investment potential of wine. The investment en primeur usually has a higher rate of return and a higher risk than the purchase of bottled wine.

Investment funds are another investment method. In a developed western market there are funds whose portfolio consists of wine. The last way is to buy a vineyard or share in it. However, such an investment is characterised by completely different risk factors than the physical purchase of wine.

Invest in Bordeaux wine

Investing in wine is almost exclusively for wines from the well-known Bordeaux region and primarily covers 1855, particularly important in this classification are products from First Growths, the five most important vineyards whose cultivation and production is limited. The wine bottles shall be made available in a strictly limited number. Each year they appear on the market no more than 90000 boxes.

The high price of First Growths wines, whose annual production is worth around GBP 500 million, is also on track for such a small number. Wine can be purchased, but it is not easy, because the small number of bottles and a large number of people who want to buy wine makes the amount of wine available for sale... and the price increases.

What conditions must investment wine meet?

In order for a wine to qualify as an investment wine, it must fulfil at least two conditions. First of all, to maintain the consistently high quality of subsequent production volumes measured over decades.

Secondly, it must be possible to store the wine and to develop it further. Care must be taken to ensure that wine does not lose value or even become inalienable.

Each box must be marked and suitably protected. In addition, noble beverages are insured to recover the money invested in them in case of unexpected accidents. Insurance up to the current market value gives a sense of security and guarantees that the costs incurred will be reimbursed.

Invest in wine is an excellent way to diversify risk....

From the point of view, satisfactory rates of return and low correlation with other assets, especially domestic assets, have been achieved over the years. Importantly, it is a clean market of its own.

It is free of speculation, and is governed only by two rules: supply and demand. Given that wines are gradually being pitted, the supply is even declining, which is a phenomenon in the general market for marketable products. The wine market is protected against the occurrence of a speculative bubble.

For example, in the gold market, it is estimated that speculative investors can account for about 80% of demand. This is because gold can be processed continuously, while wine after drinking disappears from the market. It leaves a moment of pleasure and that's all.

It is estimated that out of 100% of the pool, 25% concerns investors who are not interested in wine consumption, but will sell it with a profit. It is still quite a small group of people.

What are the costs of invest in wine? 

If we decide to invest together with a selected company, we have to bear the cost of the initial fee and the costs of wine storage. However, if we have the conditions for storing a drink and we know about it, the actual costs are zero.

It is therefore worth considering this possibility. All the more so since investing in wine is a pleasant and almost certain way to multiply the capital injected.