When a recession hits, it’s a perfect time to rebalance your investment portfolio. During economic downturns, many investors prefer to move away from risky stocks and real estate in favor of other, more stable assets. But knowing what assets to buy during a recession can be confusing—how do you know which investments are profitable? Especially now when the GBP and Euro have dropped to historic lows against the dollar, wines sourced in the UK and Europe are priced attractively due to the foreign exchange rate. Understanding global economics can play a large role in how, what, and where you buy your investments.
It helps to look at historical market performance, and fine wine is one of the best-performing assets in history. Wine is known for being stable, even in times of recession. It’s a go-to option for investors looking to slowly turn a profit over time.
If you’re deciding what assets to buy during a recession, here’s everything you need to know about adding fine wine to your portfolio.
|Table of Contents|
|What Assets To Buy During a Recession|
|Why Wine Is a Good Investment|
|The Best Wines To Buy During a Recession|
|How To Get the Most From Your Wine Collection|
What Assets To Buy During a Recession
A recession is any period of economic downturn lasting more than two quarters in a row. There are long recessions and short ones, but no matter the length, it’s a time for investors to rethink their portfolios.
You might believe that recessions are poor times to invest in new assets, however, this isn’t always true. In reality, recessions can bring about unique investment opportunities. For example, some assets become less expensive than they are during economic booms or bubbles. If you have disposable income to spend at the start of a recession, this could lead to higher profits down the road, when the market (and the asset’s value) improves.
Many investors have the best success when they take a long-term approach with their portfolios. They choose assets that will last for years and that have historically shown a slow but steady upward trend. Sometimes, investing during a recession means waiting it out for a number of years before the asset turns a profit. You’ll want assets that can see you through a downturn without putting you into the red.
So, if you’re looking into what assets to buy during a recession, here are a few long-term investment options:
- Fine wine
- Designer goods (e.g., handbags, watches, etc.)
- Precious materials (e.g., gold, silver, etc.)
- Private lending contracts
- Rental properties
Of all of these assets, fine wine is one of the easiest to break into for first-time investors. The cost of fine wine is often lower upfront compared to assets like art, gold, silver, or designer goods. And unlike private lending or rental properties, there are no contracts and there’s very little maintenance involved. Wine is also typically less risky than private lending or real estate because you never have to chase monthly payments from renters or borrowers (something that can be a struggle during an economic downturn). Once you buy the wine, you simply keep it in storage until you’re ready to sell.
Why Wine Is a Good Investment
Wine can be an excellent investment, whether you’re in a recession or not. During recessions, it’s an especially attractive asset due to its stability, ease, reputation, cost, and competition.
The wine market is well-established and notoriously slow to change. While you won’t see massive profits in a short period of time, like you might for riskier investments, what you will see is steady gains over the course of seven to ten years. In times of recession, this is an ideal investment style since it encourages you to wait things out.
Compared to other investments, like the S&P 500, fine wine tends to perform just as well, and sometimes even better, with an average annual growth rate of 10 to 11 percent:
While you might think wine requires some specialized knowledge to buy, it’s actually extremely beginner-friendly. There are a number of blue-chip wines that consistently perform well on the market, even in economic downturns. As long as you focus on these wines and buy them from a reputable source, you can start investing in wine successfully with no prior experience.
Wine is a highly desirable asset with a rich history. It’s been popular among collectors for centuries and will likely continue to draw attention from those who appreciate luxury goods. In other words, wine isn’t a flash in the pan. It’s one of the few alternative assets with proven staying power.
Most investment-worthy wines, even the finest, cost a few hundred dollars per bottle. The highest-rated vintages from top producers can cost thousands of dollars per bottle, but it’s rare that you’ll have to spend much more than about $1,000 for a truly spectacular blue-chip wine. Even some of the most expensive wines in the world, like those from Domaine de la Romanée-Conti, cost between $10,000 and $15,000 per bottle. While this is significant, it’s a drop in the bucket when compared to other collectible luxury goods like watches.
If starting from scratch, you can easily build a diverse and profitable portfolio with a budget of $25,000 or less.
Wine isn’t an exceptionally saturated market. Although it’s been around for centuries and has consistently proven profitable for some investors, many are still unaware of this investment opportunity. This makes it an easy market to break into, especially in times of economic downturn when other investors are focused on stocks or real estate.
And these are just a few of the main reasons why wine makes a great investment, especially during periods of economic downturn. However, not all wines are as valuable as others, so it’s important to know which bottles to add to your portfolio.
The Best Wines To Buy During a Recession
Knowing what assets to buy during a recession means knowing which specific wine labels will give you the highest return on investment. While it’s impossible to predict exactly how much a wine will be worth a few years or even decades from now, there are a number of wines that tend to perform well year after year.
To choose what assets to buy during a recession, take a look at some of the top-rated wines below. These wines receive high scores from critics, have a history of increasing in value over time, and are easy for beginner investors to find.
This region of France makes some of the most collectible wines in the world, especially its First Growth wines.
This French region is home to some of the most valuable wines, especially its Grand Cru labels.
|Domaine de la Romanée-Conti|
|Domaine François Lamarche|
|Domaine Joseph Roty|
California Cult Wines
These up-and-coming wines have only been popular for the past few decades, but they consistently offer some of the highest profits on the market.
|Sine Qua Non|
Champagne isn’t quite as valuable as Bordeaux, Burgundy, or cult wines, but it has an unparalleled reputation, and the top-rated vintages can grow significantly in value over time.
|Moët & Chandon|
These aren’t the only fine wines worth investing in, but they are an excellent place to start if you’re building a portfolio from scratch. One of the benefits of having a wine collection is that you can continually add to it as time goes on.
The best wines to buy during a recession also include wine futures. These wines haven’t yet been bottled (they’re still aging in the barrel), so you’re buying them before they’ve reached the wider market. Usually, you can find sought-after wines at the lowest possible price when you buy them as a future.
The reason wine futures are great to buy during recessions is because it often takes as long as two years for the wine to ship. It’s a perfect way to ride out a recession, as you can invest in a specific blue-chip vintage without having to pay extra costs like shipping, import taxes, or storage. Not all regions or producers offer wine futures, but those that do tend to be popular among investors.
How To Get the Most From Your Wine Collection
Investing in wine during a recession isn’t all that different from investing in wine at other times. Still, there are a few tips you should keep in mind when deciding what assets to buy during a recession.
- Age-Worthiness Is More Important Than Trendiness
There’s no need to buy a subscription to the top wine publications or obsessively check trending wine charts. A recession is a time to invest in the tried-and-true wines that have been popular for decades or centuries. A wine’s ability to age is one of your greatest assets in times of economic downturn. The longer a wine can stay in storage, the better chance you have to wait out a recession and sell when the time is right.
Choose wines that can age for at least ten to 15 years. Most of these will be red wines or Champagne, however, there are some white wines, like Blancs from Bordeaux and Burgundy, with aging potential. White wines can be more temperamental though, so it’s important to store them properly.
- Use Professional Storage
There are three main benefits to storing your wine professionally.
First, it’s the easiest way to maintain your collection, especially when you lay your wine down for long periods of time. You don’t have to actively monitor the storage conditions, as this is done for you. The wine will also be stored by professionals who know the ideal environmental conditions for that wine to evolve beautifully over the years.
Second, it can save you money. Professional storage fees are generally lower than what you would pay to have the wine shipped to a home cellar and to then maintain that cellar. It also saves you from spending money needlessly on import taxes. If you never plan on drinking the wine, there’s no reason to have it shipped to you. You’re able to avoid some of these added costs by storing your wine in a warehouse that’s closer to the wine’s place of origin.
Third, professionally-stored wines offer a higher return on investment. Future buyers like to see that a wine has been professionally stored because there’s a higher chance that the wine is in perfect condition.
- Protect the Wine’s Provenance
Like art, wine will only sell for its highest value when you can prove its provenance—the history of ownership from the moment the wine leaves the winery. Storing the wine professionally is one way to prove provenance, since you can show that the wine has never left the warehouse. You can also prove provenance by buying wine from a trusted retailer that inspects bottles for authenticity and maintains an extensive paper trail.
- Buy Wine Young
Wine futures and young vintages (generally any wine that’s less than ten years old) are the best to invest in during recessions because they still have a lot of aging potential ahead of them. The longer you can afford to wait, the greater profit you stand to make.
- Diversify Your Portfolio
There’s not as much need to diversify your wine portfolio as there is to diversify, say, a stock portfolio. However, it can still be beneficial to invest in a wide range of vintages, labels, and regions. Even if you break even on one bottle, you could make up for it when you sell a different wine that happens to be trending on the market when you sell.
The easiest way to follow all of these tips is to work with a wine retailer that offers a full range of services, from a diverse wine marketplace to professional storage. Economic downturns can actually be a boon for wine investors when they know what assets to buy during a recession and where to find the highest-quality bottles at the lowest possible price. With these resources, you can leverage any downturn to your advantage.
Whether you’re wondering about what assets to buy during a recession and how to start 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.