Investing in the Fine Wine Market
Investing in the Fine Wine Market
by: Kendrick Chua, The Wealth Warrior
This could be the most unusual investment an investor can ever make. After all, most of us see wine as liquor that is to be savored and enjoyed in special occasion and the rarer ones are enjoyed in even more special occasions. But what do we know about this aphrodisiac and its investing opportunities?
Thanks to the Global Investors Center, I was able to attend a seminar on Investing in the Fine Wine Market. The speakers are from Premier Cru, a fine wine specialist investment company in Europe and they travel all over the world in educating the public about the immense opportunities that lie beyond the grapevines and chateaus of France.
Why Invest in Wine?
Wine investment can be classified in the Specialized Investment in the investment spectrum such that it is not for everyone.
According to the speakers, the price of wine like any other investment is determined by the Supply and Demand market. A price of a particular wine goes higher if there are fewer bottles in the market due to consumption.
The bottom line here is that wines are meant to be consumed. And sooner or later (like twenty years later), those bottles will be opened and drank thereby diminishing the market of a particular batch of production. The wines are limited so if the supply goes down and the demand is high, price goes up. Vintage wines produced are never made again.
Wines are also tangible assets. You know exactly how many bottles the company can buy for your minimum investment of 10,000 Euros. They will go out and create a portfolio of wine for you depending on your risk profile. You can even have them ship your wines to the Philippines and just drink them.
They are also largely non-correlated to stock markets, properties, or other asset classes. They stand alone and that is why they have low risk investment and less volatility compared to other standards.
What is an investment wine?
Not all wines are meant for investing. Some are just for drinking, others are for cooking. To know which wines to invest on, Premier Cru recommends that it must an instantly recognized label or brand (First growth like Latour, Lafite, Margaux and Haut Brion) with a long tack record of quality and high prices.
An investment wine must also come from good or great vintage and be highly rated by leading wine critics on both sides of the Atlantic. Ideally, it should have a 95% rating.
It must also have strong, consistent global demand for previous vintages of similar quality and it must show consistent upward price movement beyond a minimum set of return.
And lastly, it must have the ability to age and improve over a long period of time.
How much can I earn?
From January 1990 to February 2009, Fine Wine has yielded a 15.52% compounded average growth rate (CAGR). That return is definitely much better than what the equities have generated over the past two decades. (Click here to see chart).
In conclusion
Investing in the Fine Wine market is something that is still alien for us Filipinos. If I have not had the privilege of attending the talk, I wouldn’t have an idea about this as well. The market posts lots of potential for those who want to diversify their offshore holdings. Wouldn’t it be pride as well to personally own some of the finest wine in the world?
But before tasting this asset class, remember the age-old investment wisdom: Invest only the money you can afford to lose.
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Tags: fine wine
May 25th, 2010 at 9:05 am
Hey, I just stopped by this site from Google and just wanted to take a moment to say thanks for the advice that you’ve posted.