The Beginner’s Guide to Investing in Wine
Wine may not be the first thing you think of when diversifying your portfolio.
But if you have an eye for a good vintage and a willingness to research the market, investing in this asset class may be a perfect choice.
Investing in wine is like investing in fine art.
Both markets require some finesse and research of the market before entering. Research into the current state of the market or find another experienced investor willing to show you the way.
Investing in wine is similar to investing in conventional markets—unless you choose to be hands-on.
Buying into wine is now as easy as purchasing any stock. There are now even entire investment funds devoted to wine.
But if you’re looking to invest in wine from the bottom up, prepare to invest in at least three bottles of investment wine.
Standards for auctions may differ where you live, but this is the most commonly accepted minimum.
You will also have to research professional storage solutions for your investment bottles.
Owning a wine cellar is convenient, but if you are uncertain about your storage capabilities for wine staying stable for up to ten years down the line, it is best to invest in storage geared toward protecting the wine.
Intensive wine investing also requires quite a bit of initial investment capital.
Wine auctions take place in different locations across the world, and the effort to store and accumulate wine may require eight to ten thousand dollars to begin fully investing. Irregular costs such as wine insurance are also extremely important.
Repeatedly, wine is being seen as a “protection” stock that is fairly safe against downturns and swings from similar markets. It isn’t completely bulletproof.
Those looking for the safest investment may consider buying into a company for whom alcohol plays only one part, such as Constellation Brands.
But the appeal of wine is universal and may be a good protective measure against more elastic stocks.
The world has enjoyed wine from the beginning of time.
There will always be buyers, even as tastes change!
Weather events in wine country (such as the Southern California wildfires) can make wines much more valuable.
Some wines, such as Bordeaux, are eternal favorites for wine collectors and can be tracked closer to a legacy stock.
But the recent wildfires in Southern California may result in several unintended collector’s items from the regions most affected by the blaze.
The October 2017 fires affecting Napa and Sonoma County had a devastating effect on the region, causing two wineries to fully burn down but also causing lasting damage to the region from a tourism point of view.
The grapes had apparently been 90 percent harvested, but some of the wine processed from that time had a distinctly smoky flavor.
There may also be long-term consequences for the plants going forward, as bringing a wine crop to maturation can take three years.
This is but one example of how mercurial (but potentially rewarding) the wine market can be to those who pay attention.
The most expensive bottle of wine ever sold (at $350,000) was a California Cabernet Sauvignon originally bottled in 2000, a very different time for the wine industry.
With decreased assets on hand from these recent California fires, there’s no doubt that they may be worth quite a lot to those willing to buy now and wait out the market.
Wine is entering culture in a new and unforeseen way.
Have you seen any “Rosé All Day” shirts around lately?
Wine is beginning to proliferate culture in a way unforeseen since Prohibition.
Perhaps it’s the legalization of cannabis forcing people to double down on their after-work substance of choice.
Perhaps it’s the wider proliferation of wine to the masses through retailers such as Trader Joe’s (which markets to Millennials with a message of organic food at affordable prices).
But whatever the cause, wine may be on more people’s minds in 2018—which may lead to profits for the discerning investor down the line.
The accessibility of wine into new industries may be a mitigating factor allowing for more success in wine investing.
Sodastream is making plans to allow sparkling wine to be more accessible to users of its drink disposal system in 2018.
With younger people eager to experience wine at alleviated prices, this may indeed be a gateway to more wine experimentation (and consumption in traditional venues) than ever before.
More easy access to wine may also work in countries outside the United States.
There’s a large appeal of wine in Germany and China, two countries with a thirst for wine but no wine culture as grounded in the United States and France.
China, in particular, is a growing market. The country’s demand for wine is fully predicted to overcome the U.S. by 2020.
If one wants to grab a slice of the growing Chinese luxury economy, wine may be the perfect inroad.
Wine: The luxury good for the beginning investor.
Wine is predicted to increase in value as a stock as Millennials come into their own economically, making them the new group to watch when it comes to consumption.
It definitely has the potential to be a trendy stock as the economies of the United States and China continue to grow.
However, it’s essential that the investor at hand make sure that their own personal taste for wine does not interfere with their desire to make money with the stock.
Preferences are important. But growth is even more important for success in this market.
It’s predicted that fine art may topple wine in terms of appeal to the richest investors (luxury cars also make this list).
But wine continues to be the most appealing luxury good to people of every class.
If you can afford the start-up cost of investing (or are willing to buy into a “sinful stock” that handles other types of liquid vice), you may be looking at a comfortable asset for the future.
When I first started investing in wine, I did a few things that may help you, too…
- Chose a specific type and region. For me, it’s Oregon Pinot Noir. We went on a private tour of the Willamette Valley a few years back and got to sample some amazing wines.
- Chose my favorites. I narrowed my purchases down to four wineries and I bought at least a case of each wine I was interested in collecting.
- Purchased vertical flights. If the case I was interested in buying was a 2014 vintage, I also purchased the 2013, 2012, 2010, 2009, 2008, and 2007 vintages to round out that collection.
- Made sure I had enough “everyday wine” on hand. My biggest problem as a new wine collector was that I kept dipping into my collectable wine! I remember many cold, Colorado nights thinking “well, I’ll just open the newest vintage from the vertical” and before you know it I’d worked my way through an entire collection! My friend, a sommelier, told me to avoid that I should always have a few bottles of “every day” wine on hand so I’m not tempted to dip into my collection. Great advice!
There you go! I hope you have fun starting (or adding to) your wine collection.