So you’ve made the decision to invest in fine wine; you don’t like the abstract nature of the numbers in the stock market, and you’re partial to the grape itself, so it seemed like a natural decision. Well, a few words of caution before you go head-first into the wild world of wine for profit.
You should not treat fine wine investment as a source of guaranteed profit. Of course, you want to make money from it, but it is, ultimately a gamble, and placing all your financial hopes on an ageing bottle could lead to disaster down the line. However, if approached with right attitude (largely a mixture of caution and patience), it can prove an enjoyable pursuit that can, with intelligent decision making, bring fairly decent returns.
Here’s a few of our top tips to get you started:
– Don’t buy more than you can afford to lose
As with any gambling or investment, you should not spend more than you can afford to lose. While, with wine investment, you’re unlikely to lose everything you put in (unless, that is, some unfortunate accident occurs and you haven’t insured your wine – see below for more on this!)
A related tip would be – don’t put all your eggs in one basket. Done correctly, you can make decent money from investing in wines, but you shouldn’t treat it as your primary source of income – at least not at first anyway!
– Do your research
Your specific tastes should have nothing to do with the wine you buy purely for investment purposes. Read established critics, look at market trends – you’ll find that there are a certain selection of vineyards or chateaux that will consistently produce investment quality wines. For drinking, follow your tongue, for profit, follow the herd.
Stick to the advice you read as well, don’t get over excited by short term hype.
As UK Agora fine wine specialist Nicholas Gibbs advises: “Don’t buy Fine Wines simply because the market is on the up. Have a long term view.”
– Store your wines correctly
Make sure that you store your wines under your name in a personal account at a government approved bonded facility. Bonded facilities keep your wines in the right physical conditions to mature properly and maintain (or increase) their value. Without a certificate proving that your wines have been kept in bond, their value will not keep.
It’s also important that you insure your wines to full replacement value – accidents do happen and you don’t want one to destroy all of your liquid assets!
– Avoid non-standard investments
This is related to point 2. In particular, it’s best to steer clear of en primeur investments, also known as wine futures. Buying wines en primeur means buying wine that’s still in the barrel, at a reduced price, with the hope of selling it on for a profit later on once it’s been bottled.
The thing is, en primeur wines are a risky investment and, at least for the last few years (bar 2012), have not actually made their buyers much, if any money.
Stick to reliable, well known wines, and you’ll do much better.
These tips won’t, on their own, act as a golden ticket to profitability in wine investment, but rather they should be treated as a rough guide to get you started in the right direction.