Investing in fine wine

By Chitra Kadam

New Delhi, June 12 (SocialNews.XYZ) The older the wine, the better! This phrase applies not only to the taste of the wine, but also to its value, which increases over time.

Wine is valued based on scarcity, blend, label reputation, and longevity, so keep these in mind before making any decisions. What began with a few million is now a $5 billion market, roughly 65 percent larger than a decade ago. Wine investments performed unaffected even in extreme situations such as the Covid-19 pandemic. Because of the ability of wine investments to provide a hedge against inflation and currency depreciation, wine is a favourite alternative asset for many modern-day institutional investors.

• The value of wine depends on many factors. Here are a few of them:

  Scarcity: The rarer your wine is, the more is its value. People want to own precious and rare things for status in society. Some people do it out of their pleasure.

  Combination: Wine should be a proper blend of acidity, alcohol, flavor, and tannins. This determines how well it will age with time. If the blend is not good, the age might not matter.

  Reputation: The pedigree of the winemaker is also an important factor. Traditionally, people consider the Bordeaux region, Burgundy, Rhone Valley, and Tuscany in Italy as highly reputed winemakers.

  Longevity: It might take wines 10-25 years to reach peak maturity.

• Advantages of Investing In Wine:

  Low taxes/fees: Wine investment offers advantages in associated taxes and fees.

  Stable Investment Strategy: As Wine is independent of the fluctuations of the stock market, it can be considered a stable investment.

  Reasonable Returns: The average returns are 10 percent per annum, however, a good portfolio might perform well and give you returns as high as 150 percent.

  Appreciating Asset: The value increases with time.

• Returns on Wine Investments:

  Annual returns of 10-15 percent are typical in the wine industry. However, some rare bottles may perform exceptionally well, yielding astonishing results of up to 150-200 percent. The risk is almost non-existent, and the returns are mostly stable. Wine is a growing asset, and it is rare to lose money on it.

  Wine has no correlation with the stock market, making it a safe investment. During the 2008 recession, the S&P 500 fell 38.5 per cent, while the Liv-ex 1000 for wines fell only 0.6 percent. When the pandemic began in March 2020, the S&P 500 fell 25 per cent, while the Liv-ex 1000 exchange fell only 4 per cent.

  *Steps to keep in mind while investing in wine:

  Do your research - Research is important in any kind of investment. As mentioned earlier, people buy wine out of pleasure, it is important to do research on which wine people have bought in the last few years and which one they might be interested in buying after a few years.

  Determine how much you can invest - Experts say that you need a minimum of $10,000 to start investing in fine wine. There's a wide range of wine available and it is good to maintain a portfolio of different kinds of wine such as Burgundy Wines and SuperTuscans and Barolos from the USA.

  Find a selling platform - You can sell your wine in auctions or to other private collectors. You can also sell your wine on wine stock exchanges, they might charge around 10 percent of the total profit.

  (Chitra Kadam, Financial Engineer, Hedonova)

  (IANSlife can be contacted at IANSlife@ians.in)

Source: IANS