Typically, investing involves putting money into assets like stocks, bonds, and funds. But you may also be able to benefit financially from alternative investments like wine, provided you know what to look for and where to find the excellent ones.
Let’s dive deeper into the subject of investing in wine, even if you don’t have it in your portfolio yet.
Wine and Diversification
Investing in wine provides a great and unique way to diversify a portfolio. Like any other alternative asset, wine offers the potential for high returns with a low or negative correlation to conventional investments such as stocks and bonds.
Many investment professionals agree that diversification is crucial. By putting money into tangible investments like wine, you’re buying an asset whose value is determined by factors that are barely correlated to the economy’s performance, interest rates, company earnings, or investor sentiment.
Wine’s value depends on factors that intersect with supply and demand. Those factors include weather conditions, harvest yields, vintage, and consumer trends. Since those factors have no relation to the general stock market, investors can complement their traditional portfolios with wine.
Determining Suitable Wine Investments
There are a few things you can do to make sure that the wine you’re looking at is excellent for investing:
1. Check the Vintage
Vintage refers to the year in which the grapes were picked or harvested. The harvest quality varies every year, with the weather mainly affecting the grapes.
Investors who know a thing or two about investing in wine properly understand that they should take note of vintages with the best production of that beverage.
2. Learn the Wine’s Aging Potential and Longevity
A wine’s aging potential is directly related to its quality, making it another vital factor to consider. The type of grape, acidity level, and tannins can impact a wine’s potential to remain drinkable. You can also check a producer’s history of producing well-aged wines.
As regards longevity, it is usually different for every wine. Investable wines often improve ten years after bottling, although some wines can mature longer than that while increasing in value and quality. Other wines are only enjoyable to drink for a shorter time after they mature completely.
3. Review the Producer’s Reputation
The wine producer’s reputation plays a significant role in the wine’s potential to appreciate value. Many investment-grade wines are provided by top producers such as Domaine de la Romanée-Conti (DRC), Pétrus, and Château Mouton Rothschild, and from regions like Burgundy and Bordeaux.
4. Look at Scarcity and Price History
Wine scarcity tends to provide a boost to the value of the vintages you’re holding. On the other hand, a wine’s price history shows the trend in value, with investment-grade wines moving steadily upwards.
When you invest in wine, it’s essential to watch auctions for at least six months or a year. That way, you can learn more about market trends, pricing, and how different types of wines are being sold before you venture into the market.
You can find many market sources and pricing data online, and if you’re a beginner, you should examine such information thoroughly.