“Fine wine has many advantages over other forms of investment – it not only benefits from being low-risk and tax-free, but is also one of the steadiest forms of investment. It’s relatively unaffected by recession, interest rates and stock market fluctuations,” writes the team of experts at The South African Investor.
It’s such a good investment, in fact, that “over the past 20 years a basket of fine wines will have outperformed global equities, bonds, property and, until recently, even gold, in terms of capital appreciation,” adds GQ Magazine.
But to really get bang for your investment buck, you need to know what you’re doing.
Three ways to improve your fine wine investment success
1. Avoid the ‘buy what you like’ beginner mistake
Just because you think it’s a great tasting wine, doesn’t mean others will love it too. Don’t confuse the wine you enjoy at home with your feet up with an asset locked away collecting dust. That’s where fine wine investing differ from most alternative investment like art, where you should buy what you like so you can enjoy it while it increases in value. To make money, you need to invest in wines that perform well in the investment arena.
And that means you should invest in blue-chip wine with a record of performance that’s ten years or longer.
Wines like: “First growth Bordeaux (the likes of Chateaux Lafite, Latour, Haut-Brion etc) has provided sound returns for centuries. Top Burgundies and Rhones have performed well over the past five years. Some Italian super-Tuscans and a few Australians have taken off over the past two years. Most other wines, even very expensive ones like Napa’s ‘cult Cabernets’, have never appreciated. You’d better have a good reason for thinking they're about to start,” explains Darius Sanai in the same GQ article.
2. Invest in provenance
The only way to avoid forgeries is to be able to prove where the wine originally came from. That’s where provenance (or history of origin) comes in. “Good provenance adds to the resale value and allure of a collectible item. This is because it shows prospective buyers the piece is authentic and tells the buyer a bit about the piece’s history,” explains The South African Investor.
When it comes to fine wines, it also means you’ll be able to prove the wine was stored correctly. Where possible, always buy from a reputable wine dealer or direct from the vineyard.
3. Don’t invest in white wine
As a general rule, white wine is for drinking not investing.
The reason is two-fold: Not only does red wine improve with age (“typically only the top 5% of all white wines can actually improve significantly enough with age to make drinking more enjoyable at the five years of age versus the one year of age,” explains India’s Wine Magazine), but from a collector’s view, red wine is a better investment because it’s more in demand than white.
Bottom line: If you follow these tips, investing in wine can go from fun past-time to a highly lucrative hobby.