Wine is one of those wonderful investments where even if it doesn’t meet your profit expectations, you are still left with a wonderful product, which will give you drinking pleasure for years to come. Not that there is a likelihood of poor returns at the moment.
“Wine has been doing really well in the last three or four years against traditional assets such as stocks and bonds.” says James Miles from the fine wine exchange Liv-Ex, whose index claims yields of 9.5% in the last year.
New markets in Russia, China and India have created a lot of new billionaires – which means more rich people looking to fill their cellars.
You can invest in two ways. You can purchase via wine merchants and auction houses, or you can also go through a fund management company although second option takes the choice of wine out of your hands, and like many collectors wine investors tend to also be wine lovers.
“The traditional approach is to buy two cases then drink one and sell the other,” says Miles. “The more money you have the better. You could start with £500, but ideally you need a minimum £10,000.”
Demand for fine wine exceeds supply, which is strictly controlled. No house in the world will sell direct to the public, so you have to buy through a merchant. The best ones tend to be the most visible and well known. If you decide to use a broker, he will be your mentor, so choose the one you feel most comfortable with.
Whether you simply hand over a cheque or want to spend hours discussing tannins and vintages, brokers should not charge you a consultation or buying fee. They will, however, take 10% commission when you come to sell, so factor this in before buying.
Since 1855, Bordeaux wines have been classified into five ranks. The crème de la crème are the first growths, closely followed by the super seconds; further down come the third, fourth and fifth growths. The better the wine, the longer it takes to mature: first growths will take 15 to 20 years.
Just as your first stock market investments are likely to be FTSE 100 companies, your first wine investments should be limited to:
* Bordeaux (the higher the class the better)
* Burgundies from the Domaine de la Romanee Conti (DRC)
* Vintage Port
Bordeaux is the seat of the finest red wines and has a track record for bottling the most outstanding produce. These wines are particularly favoured by the new millionaires noted above and the top growths have been subject to major price increases in the last few years, eg the top wines from DRC have at least doubled in value over the last 3 years and that is from a high base.
Experts within the wine industry reckon the best investors can see returns of up to 30% a year by sensible purchasing from the major areas. Of course, like shares, wines can fall in value too, but at least you can drink the negative equity.
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