Volatility is one of if not the biggest factors in terms of upending an investment strategy. Everything from stocks to properties can change in value quite drastically, and while some present much lower risk than others, the risk is still there. That being said, fine wine assets have historically proven to be resilient to many financial downturns, and while they aren’t exactly free from risk either, they have been the go-to investment for many individuals thanks to stable growth, steady demand, and tax-free returns.
That said, why exactly is fine wine such a good investment? Also, what are the advantages and disadvantages of fine wine investment? We’ll answer those questions and more for you today if you are interested in understanding what fine wine investment is all about:
What Are Fine Wine Investments?
So what is a fine wine investment? Well, as we said, it is the practice of investing in bottles of fine wine. How exactly is this a way to make money? Well, most of the time, investing in fine wine is only done by collectors or experts, with the former being interested in the historical value of the bottles, while the latter will be interested in the financial value.
In either case, the idea is that you will be able to sell the wine at a later date, with the hope being that the price will be higher than the price you purchased it at. This is true of both auction and private sales as well.
What Are The Advantages Of Fine Wine Investments?
There are numerous advantages to fine wine investments.
First and foremost, while they aren’t devoid of risk, they have a proven track record of growth and stability. In more recent years, however, there has been a bit of a decline in the value of fine wine, with experts pointing out that the market has become a bit saturated and the fact that there are fewer collectors looking for these types of wines has caused the market for fine wine to decline.
However, experts also point out that this is only a short-term problem and that the market for fine wines will continue to increase over the long term. That being said, you will want to do your homework and research any potential investments you might want to make in fine wine.
Additionally, there are numerous other advantages to fine wine investment apart from its proven track record, from the fact that it is a tangible asset that can be handed down from one generation to the next and that it can be used to diversify your portfolio.
Finally, one of the biggest advantages of fine wine investments is that fine wines are treated as tax-free assets. Why is this the case? This is because fine wines are classed as wasting assets, which is a term used for commodities that are predicted not to last 50 years. But of course, many wines can last longer than that, but the classification stays. Regardless, when you do sell your wine, any gains you get are not subject to tax, and it is also exempted from inheritance tax. However, there are still fees to keep in mind, such as tariffs and shipping costs.
Are There Any Disadvantages?
There aren’t many disadvantages to fine wine investment, but there are some. For one, the fact that it is such a fine wine means that it can be somewhat of a high-end investment if you want the best and the rare. This means that the investment is likely to be very expensive, so you will need a high capital if you want to access rare and expensive ones. Of course, there are other cheaper wine options out there that you can also invest in.
Additionally, the fact that you will likely be paying such a high price for the bottle means that you will want to make sure that you will be able to sell it later on when you find a buyer, which can be a problem if the market is saturated.
Another problem with fine wine investment is that it is up to you to properly care for the bottles. You will more than likely need to have a room in your home that’s built solely to store such wines, which can be expensive. However, you can opt for a professionally managed warehouse, but keep in mind that there’s an annual fee for this.
Finally, one big disadvantage of wine bottles is that they aren’t too liquid. By liquid, we mean you can’t turn them into raw cash quickly. After all, you can’t go to a restaurant and pay for your meal with a bottle of wine, that is unless the restaurant manager agrees when knowing the bottle’s value. But of course, you need to spend time looking for a buyer and selling the bottle, and experts say that it takes around four to twelve weeks to liquidate a wine portfolio. If that’s too long for you, then fine wine might not be your go-to investment.
Should You Invest In Fine Wines?
To end this article, let’s talk about whether or not you should invest in fine wines.
As you can see, fine wine investment is a popular choice for many, but it is up to you to really assess whether or not it is the right choice for you. For one thing, it is an expensive investment, and you will probably be spending a lot of money on each bottle. This might be a problem if you don’t have a large amount of capital, to begin with, so keep that in mind.
Yes, there are many advantages to fine wine investment, but that doesn’t mean that it is right for you. For one thing, you will need to be careful about the wine you buy. If you buy wines that are not of the best quality or bought at the wrong time, then you may not make a profit, or even worse, you may lose money. This means that you will definitely want to do your homework and research the bottles you want to buy.
In other words, there is a lot of preparation you have to do before making an investment, but if you are up for it, then, by all means, go ahead! Plenty of profit lies on the horizon, and they’re there for you to grasp, given you’ve done your research and put the effort to ensure your fine wines develop in a positive manner over the years.
Cru Wine offers fine wine with a modern twist, built to help buyers find the wines they want quickly and easily. If you are looking for a wine investment guide and more, check us out today!