If you’re looking for alternative investments, wine should be at the top of your shortlist. Fine wine has ballooned in popularity over the past few years, and many young investors are discovering how rewarding these assets can be.
But wine isn’t just the next “it” investment–fine wine has a long history, and this is what sets it apart from many other alternative investment options on the market today. Following the sudden crash in the value of other modern alternative assets, like cryptocurrency in 2022, many investors are looking to buy assets with greater stability and longevity. That’s where fine wine comes in. The best wines have decades of market history showing a steady gain in value over time.
Why Alternative Investments in Wine Are a Great Choice
To understand why wine can make a great investment, first, it’s important to know what an alternative asset is. An alternative asset is any investment outside of cash, stocks, and bonds. Some of the most common types of alternative investments include collectibles, such as:
- Fine wine
- Sports memorabilia
- Designer fashion (watches or purses)
The key to a great alternative investment is to find a high-quality good with a demand higher than its supply. Buyers are willing to pay more for rare goods, and collectibles like these tend to get rarer with time (and therefore more valuable).
But, not all alternative investments are worth collecting long-term, and they may prove difficult for new investors to manage. To begin with, some alternative assets (such as art, designer fashion, or cars) come with a high price tag upfront. This makes it much harder for beginner investors to break into these markets. Other assets, like sports memorabilia, may be easier for first-time investors to buy, but it can be harder to turn a reliable profit on them. Signed jerseys, for example, may only sell if the athlete is at peak popularity–something that can shift rapidly after just a season or two.
Unlike some of these other alternative investments, wine has a unique combination of characteristics that make it beginner-friendly and potentially profitable. Here are a few reasons why the savviest investors are flocking to wine:
1. Approachable Price Points
While some wines, like those from Domaine de la Romanée-Conti, cost more than $10,000 per bottle, most investment-worthy wines are well below this price point. You can find fine wines that cost anywhere from $200 to $3,000 per bottle.
2. A Reputation of Luxury
Wine is one of the most well-regulated industries in the world when it comes to assessing quality. The most luxurious wines are often rated according to a strict classification system. This means it’s easy to tell whether a wine is valuable based on the label alone.
3. High Demand and Low Supply
The finest wines are usually made in extremely limited amounts–just a few thousand bottles are released each year at some estates. And, because wine is a consumable good, these bottles tend to get rarer with time. Demand rises with each passing year.
The most investable wines grow more complex with age, usually 15 to 20 years after they’re first bottled. Some wines can even age for many decades longer. This longevity allows investors to buy wine young and wait until it’s at its peak to sell. Additionally, professional critics can estimate precisely when a wine will be at its most flavorful, and you can use this estimate to plan when to liquidate your collection.
5. Ease of Storage
Wine is also one of the easiest alternative assets to store long-term if you use professional storage services. A professional warehouse can store wine at the ideal temperature as it ages. And unlike fine art or luxury cars, there’s no further maintenance required to keep the wine in pristine condition.
You can easily diversify your portfolio since there are hundreds of top-quality wines available on the market. For a complete list of the top wines for investors, take a look at this guide to blue-chip wine producers.
Ultimately, however, most investors are interested in one thing: profitability. To decide if wine is the right alternative investment for your portfolio, it may help to see what returns you can expect.
How Does Wine Compare to Other Assets?
In terms of profits, wine generally gains slowly in value over time and rewards patience. This is also what makes it so stable compared to other investments. You typically won’t see a massive jump in price over a short period of time, but you tend not to see major dips in value either. This includes the market dips that come from recessions. Compared to the Dow Jones or S&P 500, fine wine has historically retained its value, even during times of wider market volatility.
The exact returns you can expect to make from your wine vary significantly depending on the type of wine you invest in, as well as several other factors. In general, though, you can expect an average annual growth rate of about 10 to 11 percent from your fine wine investments.
Wine is easier to invest in than most other collectibles because each year the top-performing producers release new vintages on the market. In the case of fine Bordeaux, many producers release wines as futures, years before they’re bottled. This means you have more choice over which wines to buy, and even if you miss out on one label from a specific vintage, there are many other equally-fine labels and vintages for sale.
Where To Get Started and What To Look For
Knowing there are alternative investments, in wine specifically, is one thing, but knowing when and where to invest is another. Keep these steps in mind when beginning your wine investment journey.
- Source. Unlike some other alternative investments, wine is something you can invest in from a single source through a trusted wine retailer using their extensive online marketplace. Some retailers also have close relationships with wine producers and offer wine directly from these estates which is the best way to ensure a wine’s provenance. When deciding on where to get your wine, the most important quality to look for is whether the retailer inspects bottles for authenticity.
- Store. Another important quality to look for in a wine retailer is whether they offer a full range of storage services in addition to selling fine wine. This is the best option for beginner investors, as you can buy your wine online and keep the bottles safely in the retailer’s storage warehouse until you’re ready to sell.
- Sell. Finally, an excellent wine retailer should give you the option to sell your wine directly with them for a reasonable fee (you can expect a fee of about 15 percent). This gives you access to a massive network of potential buyers, and you’ll save time and money, as you won’t have to ship your wine to another auction house.
The more services the retailer provides, the less you have to do as an investor. Now that wine is becoming the next big investment on everyone’s radar, it’s never been a better time to get in touch with the experts and start a collection of your own.
As far as alternative investments, wine is a smart choice all around. 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.