Alternative investments are growing in popularity as more investors realize that diversifying outside of the stock market is a smart idea to achieve their financial goals.
However, investing in physical assets isn’t foolproof. You want to avoid fads like Beanie Babies and maintenance-intensive goods like automobiles.
Investing in wine can effectively diversify your portfolio since there is a constant demand for this product. We have the scoop on how you can become a successful wine investor.
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What to Evaluate When Investing in Wine
There are several factors to consider as you compare fine wine investments. Make sure you evaluate the following criteria.
Aging Potential and Longevity
Investment-grade wine typically requires anywhere from 10 years to 25 years to achieve its peak price performance. One of the primary reasons for this is that fine wine gets better with age.
You will want to look for a wine that improves with age so that you have more upside potential.
There are several aging factors to consider, including:
- Alcohol content
A few differences can also exist between white wines and red wines. For example, red wines rely on tannins to darken and provide an optimal body. However, tannins are not as crucial for white wines, which naturally have a shorter aging process.
Digging deeper, the grape type can also play a significant role because there can be multiple wine types from the same region.
You will also want to ensure that the wine is cellared correctly to prevent exposure to extreme temperatures and other aging disruptions.
When you are investing in fine wine, reviewing the price history for a particular type is essential since it allows you to forecast pricing trends.
Additionally, pricing can vary by region (i.e., Bordeaux vs. Burgundy) and vineyard.
A fine wine index can make it easy to track wine market prices by region and vintage. The Liv-ex Fine Wine 1000 is an excellent starting point as it tracks 1,000 wines worldwide.
French wines tend to have the best performance as they have been crafting this delicacy for centuries.
Some of the best performing regions include:
- Loire Valley
Other fine wine regions include California’s Napa Valley or Argentina and Chile in South America.
As it’s a physical asset, wine can also be an effective way to make money during inflation. Of course, don’t place all your eggs in one basket.
Producer’s Reputation and Pedigree
Like any item, some producers have better reputations than others. As a result, their products usually appraise at higher market values.
You will want to focus on investing in wine brands with the best pedigree since their values can be safer and more likely to appreciate.
If you have the budget, first-growth producers usually vint the most expensive wine. Few wines are worthy of the Grand Cru or Premier Cru designations.
Some of the legendary estates include Château Haut-Brion and Château Mouton Rothschild.
In addition to a wine’s aging potential, scarcity is another pivotal factor in increasing investment value. A collector wine can increase in value as supply decreases and demand remains healthy.
As fewer bottles of a desirable wine remain corked, the price for each remaining one can increase. Combine scarcity with excellent aging potential and many other positive factors for a long-term investment gain.
For example, a bottle of Two Buck Chuck probably isn’t the best investment as it’s made in mass quantities and doesn’t have excellent aging properties.
Alternately, a bottle of wine like Domaine de la Romanée-Conti will likely be a better investment.
Like any agricultural harvest, some years will be better than others. Weather and crop yields are pivotal factors in a wine’s desirability.
Predicting the best vintage years isn’t a science because some production years require more aging than others to reach full maturity. So, while you can predict good or bad vintages upfront, it’s best to hold several years to diversify your portfolio.
Wine Critic Reviews
If you want to invest in wine, researching the opinions of professional wine tasters can help you determine a wine’s investment potential.
Some of the most influential wine critics include:
- Tim Atkin
- Robert Parker
- Jancis Robinson
Wine-Searcher can make it easy to find critical reviews. While each review may have different scoring metrics, fine wines with a rating above 95 out of 100 tend to be the most promising options.
Top Ways to Invest in Wine
There are several different ways to invest in wine. You will want to consider the minimum investment, service fees and storage method along with researching the wine itself before choosing the ideal option for your needs.
Here are the top options to start investing in wine.
Attending in-person wine auctions at auction houses can be an excellent way to invest in wine if you live in areas where individuals frequently liquidate their individual collections.
In addition, these auction houses could offer the easiest way to access rare wines from high-profile collectors that are not available on other platforms.
If you’re the winning bidder, your final purchase price consists of three separate expenses.
- Hammer price (your winning bid)
- Buyer’s premium (typically 15-20% of the bid amount)
- Sales tax
For wine investors who enjoy the excitement of live auctions, an in-person auction house could be a great option.
- Features rare wine
- Can acquire private collections
- Less competitive than online auctions
- Limited locations
- Might be invite-only
- Buyer fees apply
Online Auctions and Websites
An online auction is more accessible since you can bid from anywhere in the world. While the competition is higher than at in-person events, you can still access desirable collections that may not be available through other investment platforms.
Another potential benefit of online auction houses is getting wine at a low asking price if there are few bids. However, add-on fees and a minimum reserve can also apply.
Most online platforms host weekly auctions and a multi-day bidding window.
Here are some of the top online auction sites for wine.
You can participate in weekly sales through Crurated and pay for winning bids through blockchain and NFTs. It’s possible to bid on single lots and collections containing multiple cases.
The platform even has an exclusive partnership with Burgundy-based producer Charles Lachaux.
There are four different membership options ranging from free to 500 euros monthly. The complimentary Explorer membership lets you enjoy no buyer’s premium and complimentary storage for up to 50 bottles of wine.
The three paid membership plans have incrementally more benefits for complimentary wine storage and access to exclusive auctions.
- No buyer premiums
- Complimentary bottle storage
- Special members events
- Some auctions are invite-only
- Fees can be expensive
- Storage is only in Burgundy
There are multiple weekly auctions and quarterly live auctions through Spectrum Wine. You can preview upcoming lots and place early bids. There is also a retail store for on-demand shopping.
Wine storage locations are located in California and Hong Kong. It’s possible to coordinate in-person pickups at the Santa Ana, California, warehouse.
For winning bids, the buyer’s premium is 22% of the hammer price (minimum $10 premium). Shipping and storage fees also apply.
Your payment methods include credit card, check, bank wires and money order.
- Auction and retail sales
- Free membership
- U.S.-based storage
- 22% buyer’s premium
- No complimentary storage
WineBid hosts fine and rare wine online auctions that end on Sundays at 7 p.m. Pacific. The listings may also offer a Buy Now option if you don’t want to risk losing to a competing bidder.
If you want to invest in wine, you can bid on single bottles of wine or full cases. Winning bids are subject to a 17% buyer’s premium, which is lower than some competitors.
The auction house partners with Global Storage Network (GSN) to store your bottles of wine if you choose. Most of the warehouses are spread across California.
Storage starts at $0.50 per month per bottle of wine with a free platform membership. Upgrading to a paid membership costs either $49 or $99 annually and can reduce your storage and shipping fees.
Premium members also get access to early bidding and exclusive promotions.
- Auction and Buy Now
- U.S.-based storage
- 25+ years of online auctions
- No free storage
- 17% buyer’s fee
A wine exchange lets you buy, sell or trade wine directly with other owners through a trusted platform. You can avoid the excitement and fees surrounding an auction to negotiate a better price.
These platforms can also make it easier to sell your collection with a shorter holding period, while auctions can be ideal for fine wines.
Here are a few of the top wine exchanges.
The London International Vintners Exchange (Liv-ex)
Liv-ex offers an international trading platform to buy or sell wine between individuals and companies. Along with existing lots, you can trade En Primeur wine futures.
Plus, you can also take advantage of the platform’s storage facilities.
Unfortunately, membership is reserved for professional buyers, preventing retail investors and private collectors from joining.
If you’re eligible for membership, most orders ship from Europe because Liv-ex is located in the United Kingdom. Shipping and storage fees can apply.
- International trading community
- No minimum holding periods
- Quick transactions
- Strict membership requirements
- Located in Europe
Wine Exchange (Winex)
Wine Exchange helps collectors expand their portfolio of investment-grade wine and spirits. The company is based in the United States and is open to individual collectors.
You can buy domestic and international wines with collectible value. Many wines are in stock, and you may reserve pre-arrival listings as well.
Joining the company’s Blue Chip Wine Club costs $49.98 per year and helps you save 15% on over 150 Californian wines.
This is an excellent platform to buy individual bottles of recent and older vintages on-demand. However, you’re unable to sell or trade wine with other members.
- Loyalty program savings
- Many products offered
- Located in the United States
- Cannot sell or trade
- No storage options
Wine Funds and Futures
Qualified investors can trade wine futures up to three years before the wine gets bottled and sold to the public.
Yes, you can invest in wine when it’s still in the barrel.
The trading platforms call this investment option en primeur. You can be one of the first investors for a chateau’s vintage and invest in rare wines that might be sold out when they become available to the general public.
If you’re not ready to trade wine futures, you can also get paper exposure through alcohol stocks and funds that may even produce beer and liquor.
A handful of wine producers have publicly-traded stocks, such as Oregon-based producer Willamette Valley Vineyard Inc.
To the dismay of some investors, a wine fund doesn’t exist. As a result, there isn’t an excellent way to get direct exposure to wine through the stock market.
- Easier access to rare wines
- May not require shipping or storage
- Potentially high profit margins
- Can be speculative
- May not own a physical product
- No wine ETF or mutual fund
Wine Investment Platforms
Wine investment platforms can be the easiest way to start investing in wine as an individual investor or if you want hands-on help.
Most platforms have relatively low investment minimums and fees, provide wine cellar storage and can curate your portfolio for optimal diversification.
Here are some of the top wine investing platforms.
Cult Wine Investment
Cult Wine Investment will help you build a customized portfolio based on your risk tolerance and investment horizon. The platform automatically rebalances your portfolio, and you have direct ownership of the various holdings.
However, you must be willing to invest $10,000 or more to start using this wine investing platform. By investing at least $35,000, you can get access to wine tastings, advanced portfolio customization and warehouse visits.
There are no buying and selling fees, but your annual management fee can be as high as 2.95%.
- No buying or selling fees
- Customizable portfolios
- Secure storage
- $10,000 balance minimum
- High management fees
You can build a long-term managed portfolio and access a short-term trading platform through Vinovest. Consider this service if you want hands-on help with building a wine portfolio.
There are four different pricing tiers, with the entry-level Starter tier only having a $1,000 investment minimum.
This initial tier builds a portfolio of various foreign and domestic wines with an algorithm-powered selection, secure wine cellar storage and a 2.85% annual fee.
Investing at least $10,000 provides access to a bi-annual portfolio review from a professional wine advisor. You can also invest in rare wines inaccessible to Starter members and enjoy a reduced 2.70% annual fee.
Like the other wine investing platforms, higher balances such as $50,000 and $250,000 get expanded access to advisors, exclusive events and auction-only wines.
The platform recently launched a trading platform to trade wine on the secondary wine market.
This perk gives you more control and can be beneficial if you want to sell wine investments you’ve made before they fully mature. Additional fees apply for this convenience.
- Managed portfolios
- Secondary trading marketplace
- Low minimum investment
- Up to 2.85% annual fee
- Trading account fees apply
- Multiple pricing tiers
If you only want to invest a small amount of money in wine, Vint has the fewest trading barriers. For example, you can invest as little as $50 to $100 per offering as you buy shares instead of whole bottles of wine.
One potential downside of fractional shares is that you can’t request delivery of your investment. You must also build your own portfolio since the platform doesn’t offer managed accounts like Vinovest or Cult.
The anticipated holding period on this wine investing platform is three to seven years, and you cannot sell your shares until Vint decides to liquidate the offering. Luckily, a secondary trading platform may launch in the future for early redemptions.
The fee structure is also a little different than the competition. Instead of paying an annual fee, you pay an upfront sourcing fee between 8% to 10% of the investment amount.
- Low minimum investment
- Purchase fractional shares
- No recurring annual fee
- Cannot sell shares on-demand
- No managed portfolios or advisors
- 8%-10% upfront sourcing fee
Before adding wine to your investment portfolio, these questions can help you determine if it’s the right option for you.
Investment-grade wine can be worth it if you have a multi-year investment horizon and are willing to invest in an alternative asset that can require storage or shipping.
However, you should understand which wines have the best growth potential to avoid additional risk from an inferior vineyard or vintage.
According to Entrepreneur, fine wine had an average annualized return of 13.6% from 2005-2020. In comparison, the S&P 500 had a 7.8% average return for the same period.
Past performance doesn’t guarantee future results for any asset class. Having some exposure to wine can be an effective way to diversify your portfolio, but you must have a long-term investment horizon and understand the ongoing risks.
When it comes to investing in wine, this is one of the easier ways to invest outside the stock market to help you reach your financial goals. Its investment performance has a low correlation to stocks and bonds.
Additionally, the best wine producers have been making world-class wine for centuries. Plus, the beverage is likely to have strong future demand.
Wine investing can have high upfront costs as you will most likely need to buy physical bottles for several different types to have a diversified portfolio. Storage, insurance and shipping fees can also apply.
Additionally, you need to anticipate holding your collection for 3-20 years before selling for the best profit.
Investing in wine can help you diversify your portfolio, but it can be less liquid than stocks and bonds. Plus, it typically requires a long-term investment commitment.
While managed portfolios are available, wine investing typically requires more research to find the most promising offers.
Regardless of whether or not you’re an oenophile, investment-grade wine is a promising income-producing asset. Allocating a small portion of your portfolio can expose you to an asset that may outperform stocks.