Why You Should Look at Wine as an Asset Class
Did you know that investing in fine wine could offer a higher return on investment​ than the stock market? Not only does collecting wine offer a low correlation to the macro environment, but it also provides a lifestyle benefit: you can enjoy your collection.Â
For example, stock market returns average about 10 percent year after year. That’s not bad, except when you compare it to the value of a bottle of Domaine de la Romanée-Conti La Tâche that can increase by 50 percent or more within just the first couple years of investment. For higher quality vintages, the value can grow even faster and higher.
Looking at wine as an asset class can be an attractive option for avid wine collectors because trends in the market are generally more stable and predictable than other industries. For one, Domaine de la Romanée-Conti (DRC) has held a strong share of the secondary market for many decades, and this trend is not going to change anytime soon. However, to maximize your returns, you should consider what makes wine an excellent investment. But before you start buying wine as investment, you should also learn how to identify wines that are worth keeping:
Why You Should Treat Wine as an Asset Class
There are several reasons why wine should be seen as an investment class:
Reason #1: Wine Increases in Value Over Time
Unlike many other assets, wine is an alternative asset that can increase in value over time. A finite amount of wine is produced in any vintage and over time, these wines are purchased, collected and consumed so the supply decreases.
This is especially true for wines in high demand and of exceptional quality. As another example, the value of a bottle of a 1982 Chateau Lafite can increase as it continues to age. So, while you may think of wine as a product, it can also be considered an asset.
Reason #2: It’s Inflation-Resistant
Just like gold and silver, wine is an excellent hedge against inflation. When the economy declines, the wine market has stayed stable, as seen during the global financial crisis or the COVID-driven downturn just two years ago. In fact, many people see the value of their collections increase when they sell during recessions.
This is because many consumers are less likely to splurge on a bottle of wine during an economic recession.
Reason #3: It Has Tangible Value
Physical wine is different from most other types of investments. It has a tangible value that you can see, feel, and even taste. It is less risky than other types of assets, especially if you are a beginner. It can be more psychologically satisfying, especially when you get to enjoy your collection.
Reason #4: It’s a Liquid Asset
Wine can be a great option because it can be converted into cash easily. Unlike stocks that take time to liquidate, wine can be sold quickly. There is also a liquid secondary market where you can sell your wines without a problem.
What You Should Look for in a Great Investment Wine
In your search for the best wine to add to your collection, you need to consider the answers to these questions:
What’s the Critic Score?
Make sure that you take a look at the critic score. A critic score of 90 or higher out of 100 is considered an exceptional wine.Â
Is It Rare and Sought-After?
In the world of wine, some wines are rarer than others. It’s not just the rarity of the wine but also the demand. The more demand a vintage has, the higher the value of the wine.
How Much Has Its Value Increased Since It Was Released?
You also need to consider how much value has increased since the wine was first released. This is an essential aspect because it can tell you how much the wine will be worth in the future. A wine with a higher increase in value is considered a better investment than one with a slight increase.
Does It Have Aging Potential?
Aging potential is another important consideration. While it is great to buy a wine that has already been shown to have good aging potential, you should also look for a wine that will show better aging characteristics as time goes by.
Best Strategies for Buying Wine as an AssetÂ
If you want to consider wine as an investment, you need to take the same steps as other investors. For example, you should:
1. Do Your Research
This is a crucial step that determines the success of any investment. You can do your research by reading wine reviews and visiting wine blogs, as well as talking to experts in the wine industry. Collecting and studying your wines is an investment in itself, so make sure that you learn as much as you can about each bottle in your collection.
2. Stick to Your Collection
Once you have come up with a list of wines you want to collect, stick to it. It’s easier to hold on to a portfolio of wines you know rather than diversify your collection.
3. Buy the Bottles You Really Want
Buying the wines you want to collect is always a good idea, instead of investing in wines you think will be a good investment. You should not buy a wine just because you have heard that it is a good investment or a wine that you believe will be good for the long term.
4. Buy Bottles in Limited Quantities
In general, buying bottles in limited quantities is a good idea because it reduces the risk of overpaying for a wine. However, in an investment collection, you need to limit your buying to only the best wines, as it is vital to make sure that you are getting the best value for your money.
Wine Is an Excellent Asset Class
Whether you are considering buying wine as an investment or just want to add a great bottle of wine to your collection, wine is an excellent asset class. It has many benefits, including the fact that it is usually an undervalued asset and is less volatile than other investment options. However, to get the most value from wine as an asset class, you should pick the best wines that are of high quality and that have a reputation for increasing in value over time.
When you are ready for those high-quality vintage wine investments, Cru Wine is here to provide you with some of the best bottles you can find. Learn more about wine investment today!
