Invest in Wine

Posted:Abigail Andrews – Tuesday, June 26th, 2007

Reasons to Invest in Wine

There are two major reasons to invest in wine:

• Firstly as an investment in future drinking : buying young wines at the initial release price which, when mature, would be considerably more expensive to buy
• As a strictly financial investment - buying wines with the sole intention of reselling later for a profit

Obviously, investing to drink is the most sensible reason ;-). Seriously though for most people who keep a cellar, both factors will influence investment, and you can't really lose, unless the wine you choose is corked of course!

The global demand for fine wine, which is produced in very small quantities, has increased enormously over the last two decades. Wine can, and often has, out performed the FTSE 100 and the Dow Jones, offering significant returns without the volatility of the stock market.

Why does fine wine go up in value?

Fine wine matures once bottled, and improves with age. A limited amount is produced at each property every year, so, when bottles are drunk, the wine becomes rarer and therefore the price increases. While supply dwindles, demand for mature wines can make early purchases a very good wine investment.

Do I need to know a lot about fine wine?

I would strongly recommend seeking advice when investing in wine. Not all wines are suitable for investment and so it is possible for potential investors to put funds into the wrong type of wines. Seek advice though as many companies in the industry that deal with wine investment are unscrupulous to say the least! Use this excellent site to verify companies: www.investdrinks.org

Advantages of Investing in Wine?

• Finite Product: A chateau or domaine produces a finite quantity each vintage which then diminshes over time as the wine is consumed. This in turn leads to limitations on availablity and prices can subsequently rise.
• Tangible Asset: Wine is a physical product rather than just a certificate. If the worst happens the wine can always be drunk.
• Wasting Chattel: In theory wines benefit from an exemption from Capital Gains Tax. However certain rules apply. We strongly advise speaking to and Independent Financial Advisor.
• Potential Returns: If the correct wines are bought at the right time and at a good price then decent returns can be made. As a rule we estimate 8-12% compound interest per annum on your investment. Of course some wines do not perform as well and some far outperform these figures. Hence we advise seeking advice before investing in wine.

Risks of Investing in Wine?

• Wine investment is speculative and, like stocks and shares, prices can go down as well as up
• The fine wine market is unregulated and is therefore open to abuse. It is very important to deal only with reputable merchants - there is no redress if you lose your money. Use this excellent site to verify companies: www.investdrinks.org
• Investment Term - To maximise returns a realistic investment term is between 10-15 years, but at the very least 5 years.
• Wine Types - Only certain wines will accrue value and ony certain wines will stand the test of time. Seek advice before investing.

Wine Investment Tips

• Focus on the top wines from the best vintages. Only a fraction of wines produced worldwide will increase with value if kept.
• Store the wine correctly and, preferably, in professional temperature-controlled cellars.
• If purchasing in Europe, buy and store wines 'under bond' so sales taxes do not become payable.
• Take advice from established and reputable retailers and importers, but shop around for advice & prices.
• Buy your wines `In Bond' so that Duty and VAT are not payable up front. This will maximise your investment.
• Buy unmixed sealed cases, in original wood if possible, as these will be worth the most.
• Expect to invest over a 5-year period, but be ready to sell if advised.
• Buy as close to the opening price as possible.
• Buy parcels of five cases or more whenever possible.
• Invest at least £5000 if you are looking for serious returns.
• Don't blindly buy just the big names - they may have less profit potential.
• Listen to your wine merchant.
• Make sure you know the provenance and storage history of any wine you buy as this will seriously affect the market price.
• Take out insurance so that your wine is fully covered at market price rather than the price you paid for it.

Here is a list of UK Wineries and a very useful site about wine:
www.wine-searcher.com

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