The Best Wine Investment Advice for Collectors: Focus on Asset Growth

Wine Investment Advice

The most reliable wine investment advice for collectors is to buy “classic” Bordeaux vintages, as these bottles are likely to increase in value as they age. Photo Credit: Wikimedia CC user Colin

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 My accountant is a dedicated wine enthusiast, and he always gives his clients the same informal investment advice: young Bordeaux will almost always give you a better return on investment than the stock market. He has his own collection of luxury wine bottles, and within just five years of buying his first “investment case,” he’s already seen a 16 percent increase in his wine’s value. By comparison, the stock market only offered him a 7 percent average return each year.

 
This isn’t an isolated success story; many wine enthusiasts have discovered that their wine investments are much more reliable than other types of investments, including stocks and bonds. Wine is quickly becoming the most popular investment asset in the world. However, to take advantage of this trending investment strategy, you’ll need to know what wine investment advice to follow, and what advice to ignore.

Wine Could Be Your Best-Performing Asset

While wealthy investors have been buying expensive bottles of wine for centuries, wine wasn’t always the most popular luxury asset among the rich and powerful. In recent years, many investors focused on collecting classic cars, as this asset gave them the best return on investment. However, a recent study by the Knight Frank Luxury Investment Index found that classic cars are no longer the most popular luxury asset of the rich. Instead, cars are being replaced by iconic, legendary bottles of wine. Over the past year alone, wine values have risen an average of 25 percent worldwide, and over the past five years, values have grown by 61 percent total. By contrast, classic cars only rose in value by 2 percent in the past year, and luxury assets like colored diamonds didn’t increase in value at all. This means that wine investments are more lucrative than ever, and what’s more, they are expected to remain stable over the next few years.

These rises in wine value are the result of a more stable wine market overall. Just a few years ago, investing in wine was an unpredictable choice for collectors. That’s because, about 15 years ago, wealthy Chinese investors started buying fine Bordeaux in mass quantities, resulting in an unsustainable price bubble. When this bubble eventually “popped,” thousands of bottles of Bordeaux were being sold at much higher prices than they were actually worth. Today, wine collectors likely won’t face this same problem. To start, wine prices are steadily increasing at a predictable rate–they’re not dramatically increasing in value at a rate that’s unsustainable. In addition, while wine prices are rising, futures and young bottles still cost far less than mature bottles are worth, meaning that you can store your bottles for decades and make an almost guaranteed profit.

The Difference Between a True Luxury Asset and a Collectible Wine

The most important wine investment advice for collectors to remember is that luxury asset bottles and collectible wine aren’t always the same thing. A luxury asset will have high projected asset growth, whereas a collectible wine may not increase that much in value over the decades. A good example of this concept is the difference between a legendary Mouton Rothschild, and a wine from a small-scale producer like Pierre Overnoy. A bottle of Mouton Rothschild will likely increase in value at a predictable rate every year. In fact, 10 bottles of 1945 Mouton Rothschild recently sold for $343,000 at auction, which is far more than its predicted $120,000 value estimate. Luxury asset wines like this have a long track record of outperforming their previous returns year after year.

In comparison, a wine like Pierre Overnoy may be rare, collectible, and highly desirable among wine enthusiasts, but that doesn’t mean that it will offer a good return on investment. These bottles are limited in number and difficult to find, yet they never sell for more than about $100 per bottle on the secondary market, at most. You may decide to add these bottles to your collection because they are rare and a joy to drink, yet you won’t make a great deal of profit off of them. When you understand the difference between a collector’s bottle and a true luxury asset, you can make smarter investment choices.

The Best Wine Investment Advice for Collectors of Luxury Wines

To determine whether a wine is a luxury asset, rather than just a collector’s item, look at the past 20 years of investment value. In general, a wine should be worth at least 20 percent more than its original selling price once it reaches maturity. For white Burgundy, like Leflaive, compare a 20-year-old vintage’s current value to its original value, since it takes about 20 years for white Burgundy to reach maturity. Similarly, long-lasting wines like Port may not reach maturity for 50 years or more, so you can compare a producer’s 50-year-old vintage value to its original price to get a sense of how that wine will perform after reaching maturity. Although this method can’t always help you accurately predict exactly how much a young bottle will be worth 20 or 50 years from now, it can often give you a ballpark figure that you can use to make your decision.

So is there a precise way to determine a wine’s projected asset growth over the next 20 or 50 years? Unfortunately not. Predicting the future value of a wine isn’t a simple calculation; demand for that particular wine may change over time, or an auction house sale may drive up the price of that bottle more than expected. This is why any wine investment advice that you follow should be flexible and take price fluctuations into consideration. You can better your chances of earning a profit by following these steps:

  • Invest in “classic” wine styles from regions like Bordeaux, Burgundy, and northern Italy, as these traditionally perform well on the market over time
  • Invest in wine futures whenever possible to keep overhead costs low
  • Don’t buy luxury asset wine that’s more than five years old–older, more mature wine typically costs more
  • Keep your wine in professional storage to increase its secondary market value
  • Be prepared to drink bottles yourself that don’t increase in value–buy wines that you can see yourself drinking

The most important wine investment advice to keep in mind is that, while wine could earn you an excellent return on your investment, it’s still a good idea to only buy wines that you enjoy. It’s difficult to tell which wines in your collection will prove profitable in the future and which will plateau in price or even decrease in value. In other words, don’t buy a wine you dislike just because you believe it will earn you a profit. By following this advice, you’re guaranteed to get something valuable out of your collection, even if it’s just an excellent wine tasting party.

Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storageContact us today to get access to the world’s best wine.

At Vinfolio, we help our clients buy, sell, store, and manage their most
treasured bottles of wine. But in our spare time, we’re just a group of
passionate and slightly obsessed oenophiles–we love sharing a great
glass of vintage Champagne, followed by a Burgundy, and then a
Bordeaux, to get things started. We’re always obsessing over the latest (and oldest) vintages, and we want to share that knowledge and passion with our readers.