There’s one question many savvy investors ask: Is it worth investing in wine? The short answer for many investors is “yes.” Buying fine wine can be an excellent way to diversify your portfolio. As one of the historically best-performing alternative assets on the market, it’s become an increasingly attractive option to investors around the globe. In fact, fine wine consistently matches and even outperforms returns from the S&P 500 year after year—and people are starting to notice.
If you’ve never invested in fine wine before, you may be wondering what the long-term prospects are for this type of investment. Most people want to know:
- What Returns Can You Expect Over Time?
- Can You Invest in Wine if You Aren’t a Wine Expert?
- How Much Should You Budget for a First-Time Investment?
In this guide, you’ll learn the answers to all of these questions and more, preparing you with the information you need to make the best choice for your portfolio.
Five Benefits of Why It Is Worth Investing in Wine
There are several benefits to investing in fine wine: it’s a relatively stable asset, the best wines often steadily increase in value over time, and it doesn’t require active management. However, there are a few other benefits to fine wine that investors may not be familiar with, but can be just as important for you to consider. To help you decide if it is worth investing in wine, here are five essential benefits you should know.
1. Wine’s Unparalleled Reputation Offers Stability
People have been collecting wine for centuries, and in this time, there’s always been a demand for the finest and rarest bottles. Where there’s demand, there’s the opportunity to resell the best wines for a profit. It’s akin to gold investments. Both gold and wine are precious materials that people are likely to continue buying well into the future.
2. Market Gains Are Often Slow, But Steady
The returns you can expect from your wine investments may not be as massive as returns from riskier assets. Wine generally increases in value slowly over the course of ten to 20 years (sometimes more), and may only increase by a few hundred or, rarely, a few thousand dollars. What makes wine appealing as an investment though is its historically-steady gains. While no asset is 100 percent predictable, wine investors generally anticipate their wines will gain slowly in value.
3. Your Portfolio Can Manage Itself
One major appeal of wine investments is that it doesn’t require a lot of legwork on your part, at least not after you make your initial investments. Once you have a collection of wine in storage, you simply wait for those wines to age and gain in value. And, if you keep your wine in a professional storage warehouse, you don’t even have to manage any of the environmental conditions. Future buyers also like to see that a wine has been stored properly over time, so this further increases the value of your collection.
4. Market Data Is Easy To Access
Even if you know next to nothing about fine wine, it’s easy to find information on how your wine is performing on the market. Before you buy, you can look up professional critic scores for any top-tier bottle to decide if it is worth investing in that wine. Websites like Liv-ex also track wine values over time, so you can keep an eye on how your wines are performing.
The best winemaking regions in the world, like Bordeaux and Burgundy, even have classification and ranking systems listing the absolute best wines from those areas, which also tend to be the most valuable. For Bordeaux, it’s the first growth estates, and for Burgundy, it’s the Grand Crus. Here are a few producers you might consider:
5. The Barrier to Entry Is Low
It is worth investing in wine, no matter the size of your budget. You can start small at first, then use the profits you make from reselling wine to reinvest in more bottles. It’s a flexible investment option, and now that the finest wines in the world can be found easily online, it’s never been easier to build a collection from scratch.
The Most Common Questions Investors Have About Wine
You may still have some lingering questions about whether it is worth investing in wine. It can feel overwhelming for first-time investors, especially those who aren’t that familiar with the industry. To help you navigate this process, take a look at some of the most frequently asked questions below.
What Returns Can You Expect Over Time?
Wine has an average compound annual growth rate between 10 and 11 percent, based on historical prices over the past 30 years. Some wines gain in value more than others, but generally, wine performs slightly better than the S&P 500, Dow Jones, and crude oil. In recent years, wine has also outperformed gold.
Can You Invest in Wine if You Aren’t a Wine Expert?
Yes. Many investors know little about fine wine and are still able to sell their bottles for a profit. You may, however, want to know which wines are considered blue chip, and this guide can help. It’s also important to know roughly when you should sell your wine. Apps like VinCellar allow you to track all of your wine in one place, making this easier to manage.
How Much Should You Budget for a First-Time Investment?
If you’re just getting started, it helps to have around $25,000 to spend up-front to get a decently diverse collection of fine wines. However, even if you only have $1,000 to spend, there are fine wines that fit within this budget.
Is it worth investing in wine? It can be when you have the best resources. Fine wine is one of the most interesting alternative assets on the market today, and with the right tools, you can start a collection of your own.
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 finest wine.