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May 29

How wine investment can provide you a large return in a timely manner

Posted by abiao at 10:02 | Default | Comments(0) | Reads(1798)

If you'd like to diversify your investments, have you considered buying fine wines? Like any investment, there are risks involved, but there is also the possibility of getting a good return. In addition, wine investments have an advantage that stocks and bonds can never match - you can sip and savor your investment.  Many people have doubts when it comes to making an investment, and that usually happens when the buyer doesn't really know the market. Prior to spending money on wine cases, every investor should get to know the market first. Here are some tips on how to invest in fine wine while avoiding the pitfalls.

Why invest in wine?  
Volatile stock markets have left investors seeking ways to diversify and minimize their risks. Tangible assets are one avenue, and wine is a possible purchase in this area. A fine wine is a finite resource, which should increase in value over time. This is both due to the maturation of the wine, and the fact that as people drink a prized vintage, there is less of it left on the market.  

How do wine prices work?  
The Liv-ex 100 is an industry benchmark which tracks the prices of investment grade fine wines from Bordeaux. During the years 2009 to 2011, the prices on the Liv-ex skyrocketed, and wine investments grew in popularity. After that, prices dropped again to more reasonable levels, and seemed to stabilize during 2013.  Investments in wine may be able to bypass capital gains tax (since it is a "perishable item"), but it is an unregulated class of assets.  Prices also vary for individual producers and vintages. In the world of wine, instead of stock analysts, you rely on wine critics. When a wine receives a good review from a famous and influential critic like Robert Parker, the prices can soar. Then as the wine ages to its peak, prices generally go up, rising for at least 10 years for fine wines, and sometimes more.  Investing in older wines can be more risky.

How do you invest in wine?  
Wine merchants can sell you wine for investment. Make sure that you are working with a highly reputable, well-established merchant. Do some checking, and make sure they have been in business for some time, and have a good reputation. Also, do your due diligence on any wine recommendations they make. It is simple for some merchants to talk unsuspecting new investors into making a poor purchase decision. They make a margin on any wine you buy, regardless of how it performs for you as an investment.  Wine funds are like mutual funds for wine. You buy into a wine fund, and they handle everything from there - selecting the wines to invest in, buying, shipping and storing the wine, and deciding when to sell it. You get the benefit of their expertise, and a more diversified wine portfolio than you could probably purchase on your own. On the downside, you are also paying annual fees for the fund management, and you do not own any tangible wine yourself, just shares in the fund.  Wine trading websites have sprung up which allow individuals to buy and sell wine online. You can see pictures, or sometimes even videos, read user reviews of different wines, and verify prices from other sales. Some systems will allow you to monitor the value of your wine portfolio, or offer opportunities to socialize with other wine enthusiasts.

Before starting to invest in wine, get to know the market. Meet up with potential investors, ask for advice from wine experts, and choose a wine merchant who can help you understand the industry. There's no exact recipe to successful wine investments as there's always a slight chance for something bad to happen.
Wine advocates and connoisseurs in general, are certain that investing in wine can bring large returns. The liquid asset has low volatility, long-term appreciation, and increased risk-adjusted returns on investment. The consumable nature of fine wine constantly increases its demand in time, thus helping investors own scarce wine that can be worth hundreds of thousands of dollars. Don't get your hopes up too soon tough, as you might have to wait up to 15 years for your wine to get to that value.

By Davis Miller and wineinvestment.com!

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