Quantitative finance collector
C++ Matlab VBA/Excel Java Mathematica R/Splus Net Code Site Other
Apr 12

Is wine investment still a platform for a fruitful return?

Posted by abiao at 09:47 | Default | Comments(0) | Reads(1759)

Investing in fine wine can be a way to get an excellent return on investment, and it offers benefits that stock investments cannot match. Investment grade wines typically yield 10 to 12 percent return annually. That is a healthy return, better than many blue chip stocks. If you look at specific examples, the results can be stellar, with the price of a case of La Mission Haut Brion gaining 285% over a ten year period. And unlike investing in Apple shares, you could sit back with friends and savor a bottle of your top quality Bordeaux while you toast your investment success.

When assessing the fine wine market as an investment, a potential investor should ask himself two main questions: "what makes up an investment grade wine?" and "how can the investment grade wine market be defined?". In all honesty, not all types of wines are a good investment; poor quality, short longevity, and massive productions make price appreciation impossible. With 80% of all fine wine coming from Bordeaux, the global wine market that is worth investing in makes up for 1%.

How wine prices work  
There are many factors that can go into the pricing of a bottle of wine, but like other areas of the economy, the classic principles of supply and demand come into play. The higher rated a wine is, the more demand there is for it. Professional wine critics give different wines a rating based on their taste, smell, and appearance. In general, the higher is the rating the higher the price.

One noted critic, Robert Parker, issues wine ratings that can dramatically affect the price of the wine. For instance, when he rated a particular California wine (the 2003 Scarecrow) at 98 points out of 100, the price per bottle skyrocketed from $100 to $1,000.  Many wine investors like to buy unrated wines that have no score from the top critics yet. If they choose one that gets a superb rating, their investment value could rise dramatically overnight.    

Investing in unrated wines takes some knowledge, because not every wine will get those stellar ratings and results. On the other hand, when you purchase a bottle of known high quality, supply and demand will still give you increasing prices. Many people buy these wines to drink.  As each bottle of a valued vintage is consumed, the supply decreases, making the rest of the bottles available worth that much more.

Where to start with wine investing  
Buying wine is fairly simple, though you do need to pay attention to proper storage of your investment stock. If the wine is not kept under optimal conditions, it could decrease your value.  Fortunately, some wine sellers will be willing to hold your wine in proper conditions for you until you are ready to sell or drink it. You should be prepared to wait for quite a while. Experts say that a recently bottled wine needs at least 5 years to become fine wine. So if you have the budget to invest, do it wisely and be patient. There is a fruitful return, as long as you're willing to wait.

Buying vintage wine - is vintage wine that valuable?   
Buying the top vintages of investment grade wine is not as simple. The top chateaux in Bordeaux are in great demand, and you’re not going to find these bottles on the shelf at your local wine store. One way to go about this is to find a wine retailer who imports the type of wine that you are interested in, and develop a relationship with them, so that you can get some of these stocks when they come in. Another source is the internet. There are plenty of sites on the internet that sell high quality wines, both by the bottle and by the case.

Be sure to deal only with reputable dealers, however, since there have been cases where unscrupulous sites have sold either fake or spoiled wines. Big auction houses also have fine wines available at auction. You may pay a premium price for these, however. Purchasing wine futures is another avenue. Used primarily for Bordeaux, this is called “en primeur”, and it means that you purchase the wine before it has been bottled. It is a risky investment, but it can make you a millionaire.

Add a comment
Enable HTML
Enable UBB
Enable Emots
Nickname   Password   Optional
Site URI   Email   [Register]