As well as being one of the world’s favorite tipples, wine is a great investment opportunity. But you might not want to rush to invest in your favorite Friday night Merlot, as not every wine is a good addition to your portfolio.
Luckily, the wine industry helps you know where to invest, by defining “investment-grade fine wines”. These high quality wines usually go up in value after around five years. Of course quality matters, but what makes a wine especially investment-worthy? There are a few things at play:
People are drinking more wine than ever before, but there’s only a limited amount to go around. Fine wines are especially rare, and this makes them worth more. To add to that, fine wines get better with age, so they’re more desirable and valuable after they’re bottled, which makes them an even better investment.
So how much return can an investment-grade wine make? An industry benchmark called the Liv-ex 100 tracks fine wine prices. In the past 20 years, its value rose by over 270%, beating the S&P 500 – the standard index for US companies. Fine wine has done better than other investments during market downturns too. For example, compared with equities and bonds, wine prices remained fairly stable during the 2007-08 financial crisis and the 2020 pandemic downturn.
On top of all this, fine wine’s also handy for diversification, as it tends to have less in common with stock markets and traditional investments. When you put it all together – wine’s shown healthy growth, resilience against economic uncertainty and it also helps balance your portfolio. Cheers to that!
Keep in mind that there are always risks with any investment, and wine’s no exception. Your wine bottles need the right storage conditions to achieve the best aging process. There’s also a real risk of fraud and scams around wine sales, so it’s worth getting a wine specialist to help you source the right vintage and supplier.
Lucrative alternative assets were once the reserve of the ultra-wealthy and major businesses
But no longer: you can reap the benefits of twelve alternative asset classes by investing in just one Hedonova fund – and you can get started with just $5,000.
One way to get started is to simply buy wine yourself through wine brokers or at auctions. Although it’s the simplest way to get started, you’ll need a deep understanding of the industry to pick the right investment, and buying your own bottles adds the complexities of transport, storage, and insurance.
You could consider investing in wine-related stocks, but that cancels out the benefit of wine diversifying away from traditional markets. A different approach could be to invest in a wine-focused fund. These funds include money from a broad range of investors and they select specific vintages to invest in. But there’s a limited number of wine-focused funds out there, and they often require a high level of investment.
A simpler and more hands-off way to get started is to invest in a broader alternative asset fund that includes wine as one of their investments. These funds have the expert knowledge needed to select the best wines and create a blend of diverse alternative assets for the best return potential.
Our approach to investing in wine is to look for inefficiencies in the supply chain. We try to find where we can apply capital to make the supply chain efficient. Wine is a very expensive business. Grapes only grow once a year, take up a lot of land, and require a lot of care and tons of water. Years of rent and insurance need to be paid, and once harvested, the grapes need to be put in barrels and stored in temperature and humidity-optimized conditions. The vineyard's money is stuck for a very long time. We buy the barrels of entire harvests from the vineyards which give them cash they can use for the next harvest. And because we're buying early, when it's essentially grape juice, we pay a much lower price. We then hold the wine for two to three years before selling them to the next investor: other wine investment companies.
Our wine holdings are mixed, with both blue chip performers like Burgundy reds and upcoming wines like whites from China and Australia.
This guide was produced by Finimize in partnership with Hedonova.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.