Traditional investments range between stocks, bonds, mutual funds, and real estate. They’re time-tested, stable, and physically rooted, making them worry-free assets for investors, especially when compared to something modern as cryptocurrency. But did you ever consider something more tangible but out-of-the-box, like a wine investment?
Wine investments have been around for years and have recently become more accessible to the general public. If you’re looking to start a wine investment strategy, don’t worry; here are five tips to get you started.
Step 1: Do Your Homework
Look for a winery with a good track record with investors: not just the winery, but the location and the region of the country overall. Learn about what makes a particular variety of wines distinctive, and make sure you think deeply about the wine you’re buying now and the next vintage. Once you have learned about what makes a good wine, you can use that knowledge to evaluate whether or not a vintage will sell for more in the future.
Step 2: Practice Patience
A wine investment’s value appreciates and depreciates over time due to demand. Thus, wine is a long-term financial commitment. Most people don’t sell their wine after three or four years. If you can wait that long, you should buy wines now and store them properly. Remember: red wines must be kept in areas without any light source, while white wines can be stored in room temperature areas.
Step 3: Spread Your Wine Investment
Building a wine collection is similar to investing in stocks and bonds. You want to create a diverse and well-rounded portfolio of wines.
- You should purchase a variety of wines, not just wines from one region.
- A wide selection of different vintages is also ideal.
As your older wines reach their peak, you can introduce newer, less mature wines into your collection, ensuring that you will have a successful wine collection. The older or rarer the wines get, the higher their value. The newer but still valuable ones are there to protect your wine investment.
Step 4: Physically Protect Your Investment
While the size of your wine portfolio is essential, it doesn’t matter if you can’t keep the wines you have stored safely.
If your collection consists of every wine in the world, you could consider storing them at home. This can be secure and climate-controlled, but it will still need to be monitored by a professional. Ideally, you will want to pay a professional to do this for you, as there is a long-term benefit.
Remember to keep your wine investments stored at a 45º angle. As mentioned earlier, red wines must be stored in dark areas away from any light source, while white vinos can endure a bit of light at room temperature.
Step 5: Set Your Budget or Capital
The first step in any investment is considering how much you are willing to invest. Wine investments may not take as little as stock investments.
Investing in wine is not without risks. Natural disasters or poor harvests can threaten the crop. A financial crisis or a new tax can affect the price of stocks. Using various reliable sources and insured wine collections can mitigate the risks of building a new portfolio, even during a financial or health crisis.
Factors to Consider for Wine Investments
Like any traditional investment item, there are risks you assume in putting your money into a product. However, if you choose the right wines, you can keep this risk relatively low. Here are some considerations for wine investments:
- Rarity: Strong investments are in products which cannot be easily mass-produced. For example, wines are typically grown in specific regions and produced relatively small quantities.
You should never purchase a poor-quality wine, especially if you want it to maintain its high quality. Consult a classification system to ensure that the wine you buy is high quality. Purchasing a high-quality wine will ensure that it remains in good condition throughout its life, allowing you to drink it.
- Type: Red wines, sparkling wines, or dessert wines are the most famous varieties for investment. That is because wines with these characteristics often develop or improve with age.
- Price: Despite wine becoming more stable in terms of price volatility over the years, it is essential to protect your assets. Before purchasing or selling any products, beware of how wine’s value fluctuates.
Even novice investors will advise you on how volatile the market can be regarding traditional investments. That’s typically not the case with wine because it develops consistently low volatility over time. This is due to an imbalance of supply and demand. As more and more people enjoy a specific wine, its flawlessly inverse supply curve becomes more pronounced. Investing in fine wine offers low volatility, regardless of typical market fluctuations.
Therefore, you will not experience any roller coasters as a fine wine investor due to its low volatility, so you don’t have to worry about how you time the market or the value of your portfolio unpredictably changing. Wine investments aren’t also traded publicly, so you don’t have to stress out about public market volatility.
Here’s a real-life instance—when COVID-19 began to spread across the globe in 2020, the S&P 500 and Dow Jones dropped more than 20 percent in the first quarter, while Liv-Ex 100, which tracks the top wines from around the world, only dipped 1% and managed a rise of 4.65% across the year.
While most investors understand that a healthy investment portfolio contains diverse assets that vary in how they correlate to the stock market, they may not realise that combining many different stocks, bonds, and mutual funds does not automatically make for a healthfully diverse portfolio. These assets are all contingent upon the same systematic factors, meaning that they are vulnerable to the same risks.
For example, if one stock drops in value, so will all of the other stocks held in the same portfolio by default. Investors can lose so much money due to liquidity risks from a stock market crash, interest rate risks from rising rates, and inflation risks from volatile monetary policies—not to mention inherent risk—overwhelm their portfolios.
Invest in the Right Wine Today
Since wine investments are more accessible now than ever before, you should consider getting into the game before high-quality bottles are bought out. Like cryptocurrency, investing in wine is a game of punctuality—the earlier you acquire prime vintages or varieties, the more selling power you have over those who just joined. Remember this beginner’s guide, and your wine portfolio will be admired and envied by your fellow investors.
Build your wine investment today with Cru Wine! We provide fine wines with a modern approach that makes the experience more accessible and enriching. Buy from us today to begin your wine investment journey!