Like any other investment vehicle, wine investment is contingent upon supply and demand. Still, it is a fascinating and interesting market due to the product itself. Wine carries qualities and characteristics distinct unto itself, making the investment process more exciting than for example, investing in gold. While it’s true that gold is an impressive and durable asset, there is very little personality or charisma involved: in other words, one nugget is the same as the next. With wine, monetary value is accompanied by history, charm and an organic elegance. Vintages cannot ever be replicated, and each bottle is, by definition, unique. Additionally, supply is finite, lending yet another layer of appeal and desirability.
When compared to the stock market, gold, or even fine art, why choose wine? There are several reasons why wine makes for a great addition to your investment portfolio.
- First, unlike many other investment channels, the fine wine investment arena can be tested with a relatively lower entry point than other luxury assets. For example, when compared to the outlay of funds required to invest in markets such as high-end real estate, the wine investment landscape can be tapped for less, and with great success.
- Wine is a tangible asset. Not only that, it is also easily transportable and ultimately consumable – two big plusses. These qualities only enhance its versatility, as it can be purchased solely for investment purposes, or it can be enjoyed and consumed at will. The same can never be said for any other luxury asset.
- Wine investment represents a wonderful way to diversify an investment portfolio. Equity markets have historically become more correlated when markets face upheavals. However, investment quality wines tend to run independent of other major equity-type asset classes such as hedge funds, gold or other luxury commodities. Because of its market performance, investment-grade wine may assist in protecting and even insulating a portfolio against negative market trends or events which impact other asset markets.
- Wine experiences little to no market volatility. In fact, investment-grade wine produced the second lowest volatility of annualized monthly returns among all major non-fixed-income asset classes.
- Investment wine provides long-term capital growth. Over the last 20+ years, the wine market produced an annualized return of over 13% – once again, higher than comparable asset classes over the same period.
- Wine investment can hedge inflation impact. Because it is a tangible and consumable asset, the price of investment wines tends to increase during period of higher inflation. This implies that wine investment might actually hedge against rising inflationary trends.
- Investment wines have no connection to stock market volatility. Because of the nature of the product, wine is not tied to any economic trends per se, and is relatively uncorrelated to traditional markets. This suggests that the returns associated with wine investment are most likely safe from being negatively impacted by a surge in stock market volatility.
- Wine can act as a currency hedge. Depending on where the investor resides, wine can provide investors with a hedge against a decline in the value of their country’s currency. It does not have the same level of vulnerability as other luxury assets or traditional investments.
- Wine lacks encumbered debt. Because wine is never borrowed against, there is no encumbered debt associated with the investment.
- The wine market is not controlled by investors. On the contrary, the wine market tends to be controlled by the wealthy, as opposed to the gold market which is dominated by professional investors.