Think About Your Budget and Returns
Just how much money can you make from wine investments? Between 1993 and 2013, a diverse portfolio would have given you an average of 13.62 percent in returns on your investment, which is twice as much as the average S&P 500 return. However, wine investments can still be risky, and you need to know which wines are going to give you the best returns in the future. To find this out, research current market prices using sources like Liv-ex, and consider investing in producers that are in highest demand among your peers. As for your budget, experts suggest setting aside at least $10,000 for your first batch of bottles. You should be willing to lose all of this money, so if you can’t afford to lose the $10,000, don’t gamble with that money on wine.
Choose Your Retailer
Which wines should you spend your $10,000 on? That depends on your experience level and contacts. For instance, if you’re on a mailing list for an in-demand winery, you’ll want to rely heavily on the low prices offered on the mailing list, then sell any wines you don’t drink as soon as possible. This will give you the fastest returns on your investment, especially if you sell the wine shortly after it has been released. However, if you’re not on a mailing list for a sought-after winery and you don’t have any close contacts who sell authentic wine for a steal, your next-best option is to look for wines on the secondary market that stand the test of time. Choose a retailer that keeps its wines under safe storage conditions and that checks its bottles for authenticity. Once you buy a few bottles, keep them under storage until they reach peak maturity. This will often take five or even 10 years, but is well worth the wait because the bottles will sell for a much higher profit once they reach prime drinking age.
Buy Rare, Ageable Wines
You’ll want to consider the quality of the producer and the vintage to find the best investment wines that will cellar for decades. First, look for wines that have high tannins and acidity. Next, read the tasting notes for the vintage to find out when critics think the wine will be ready to drink. Vintages that reach maturity in about five years will give you the fastest investment return, but they might not be worth as much as bottles that you buy very young and cellar for 10 or even 20 years. The best wine investments take a decade or more to mature.
Jancis Robinson explains this phenomenon well: the older a wine gets, the rarer it gets. For instance, a producer in France might only be capable of making 5,000 cases of wine every year. After those cases have been sold, many of those wines will be consumed over the years. By the time 15 or 20 years have passed, there might only be 100 cases of that vintage left in the world. If you own one of these cases, you can charge a fortune for that wine, even if you originally bought it for less than $100. However, a mature wine is only as good as its cellar, and the best way to make a profit is to store your wine professionally, because a wine can easily spoil after 20 years in the wrong conditions.
Invest in Quality Vintages and Regions
To make the most out of your investments, you’ll want to diversify your collection. Investor Mark Ricardo explains that you never want to depend on a single bottle for your retirement. That said, a truly diverse collection isn’t easy to collect, and a good one requires at least $100,000 in up-front investments. This is why you should build your collection patiently and slowly, investing in the top wine regions that you can afford. Old World regions like Burgundy and Bordeaux are excellent choices for beginning collectors because these wines are high in quality, rare, and in high demand among collectors.
As an example of vintage, take a look at Bordeaux’s Pauillac terroir from the year 2000. This vintage was worth about $2,000 on high-end estates in the region, but today, those same bottles sell for more than $10,000. Why is this the case? Because the weather in 2000 was near perfect for winemaking, resulting in multiple perfect scores on the most popular wine labels that year. Now that these already-perfect wines have matured, they are worth more than five times as much on the market. The best method for investing in wine is to research the highest quality vintages from top regions like Burgundy, Bordeaux, Napa Valley, and Tuscany, buy cases from the most recent high quality vintages, then keep these wines under lock and key until they’re ready to drink.
About 75 percent of the investment-grade wines on the market today come from Bordeaux Grand Cru estates, but you don’t have to stick with this region to make a profit. Other wines worth investing in are Super Tuscans from Italy, cult wines from California, and Premier Cru or Grand Cru Burgundy. The best producers are those that make fewer than 20,000 cases of wine every year, and that make wines which will cellar for at least five years, preferably more. You might be tempted to invest in lower-priced, off-vintage wines, but this is a dangerous process for beginners. It’s simpler and safer to stick with bottles of verifiably fine wine when you first get started, rather than gambling on vintages of lower quality.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best investment wines.
Harley is an Executive Wine Specialist for Vinfolio, helping collectors find the best wines for their collection. He’s a lover of everything outdoors and the proper bottles to go along with it. You can find him at any of the newest cocktail bars and restaurants in SF or on an adventure somewhere in between Lake Tahoe and the California coastline.