Why Fine Wine Boasts one of the Best Performing Asset Classes of the Last 20 years

| July 30, 2017 | 0 Comments

investing in fine wineAs an investor, you have a very simple and straightforward demand on all the items you choose to invest in, they must appreciate in value. In most cases, you do not want to deal with the rising and falling markets, hedging complications or having to switch to inverse ETFs.

Properties are close to their peak, stock markets are extremely volatile, and they all have to be watched all hours of the day with figures crossed, you need somewhere safe to turn.

Where investments are a little more stable, and returns are sure. You need diversification to rescue you. Have you, perhaps, considered investing in fine wine?

Wine as an Investment

Over the past 20 years, wine has shown great potential to be a great investment with compound annual rates ranging from 10-20%. Beautiful wine, however, no nothing new in the investments markets.

If you are wondering whether you should or should not invest in wine, then you may need to know several why you should invest in fine wine.

Traditional markets have been static. Investors of fine have been experiencing yearly double-digits in the past five years. Its characteristics of stable returns and low-level risks have continued to make it an attractive investment.

investing in fine wineWith the market currently occupied with prestigious chateaux of Bordeaux, only less than 1% of the wine produced worldwide is considered investment grade.

The quantities that are being produced are continuously decreasing because people are consuming more and more wine. These consumption levels ensure that the growth rate of wine as an investment continues to grow with an inverse supply curve.

Fine wine is a great investment because unlike most assets, its desirability and prestige increase with time.

Investing in Fine Wine

Top vintage French fine wines have had returns, over the decade that was much higher than equities, property, and gold. During this period, the value of fine Bordeaux red increased to 138% which is equal to 11% per year.

The increase is up to 10-fold for the most famous labels like the Lafite Rothschild.

Statistical data from Live-ex Wine Investable Index showed that the price of the most famous Bordeaux reds from 24 of the leading chateaux between December 31st, 1999 and October 31st, 2009 the return on investment was 138%.

The Lafite Rothschild whose 12 bottle case cost $2,613 in December 1982 was selling at $25,500 by the end of 2000. This is a return of more than 876%.

Limited Supply and an Increase of Buyers

investing in fine wineThe price surge is due to limited supply and an increase of money buyers from Asian countries. Specialists of investment assets speculate that the more China and other Asian countries continue to industrialize, the more the price of fine wine will increase.

If you are going to invest in wine, ensure that you are investing in the right wine. Like all industries, you may be duped into thinking that all types of wines are great investments.

A belief that might cost you a lot of money and heartache. For wine to be considered as fine wine, it must improve in the bottle, appreciate in value and be something that buyers are looking for.

To satisfy these requirements, the wine you invest in must have a permanent track record. The track record is often centuries, not decades. It must also have received substantial critical acclaim.

You may want to consider using the Parket score on the fine wine before you invest in it. A classification scale of up to a 100 as accredited by the most influential man in the fine wine investment industry, US journalist Robert Parker Jnr.

Investing in wine will prove to be something worthwhile if you invest in the right wine. Over the past 20 years, some of the more expensive poor vintages have experienced incredible losses. In 2011, some at the top market may have lost 50% or more.

To invest in wine, you do not have to be an expert. Although you might find that interest is an added advantage. Initially, it may be better to benefit from the expertise available in a collective wine investment.

This will help you save yourself and your money from the growing wine scammers that will take your money and give you bad wine.

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