A beginner’s guide to DIY wine investment
When it comes to starting an investment portfolio in fine wine, there are two main avenues one can take. Firstly, there is the option to sign-up with an investment company; these third-party brokers charge a small annual fee (usually between 1-5% of your total portfolio’s worth) to help manage your investments for you. This typically includes the sourcing investments based on their own, internal analytics, buying wine on your behalf, storing wine at professionally maintained facilities, and providing options for selling it on at the optimal time. The benefits here are ease of use and time saved; by sacrificing a small amount of potential revenue, an investor can spare themselves the trouble of going through what many consider busy-work.
The other option is to create and maintain a portfolio single-handedly. This can be a lot of work, however, those with a genuine passion for fine wine will likely find this process both fascinating and rewarding. If you are considering going “DIY” with wine investment, then here are some tips to help you get started.
First of all, it is recommended that one has a minimum $10,000 available to make wine investment worthwhile in terms of returns. If you have this amount and you are looking to invest, then the first step is going to be research. Look at identifying some vintages which have performed well in the past; typically, the top earners will be Bordeaux or Burgundy wines, although wines from many other regions can also perform well and the market for smaller regions is growing every year. Wine investment exchanges such as Liv-Ex, Ca vex, and LiveTrade will allow you to track prices and sales on the top vintages in order for you to narrow down your selections and create a shortlist of potential options. Fine wine brokers like UKV International provide options for purchasing wine, wine evaluations. storage and insurance all under the same roof.
Diversification within a wine portfolio is also key. As mentioned, Bordeaux and Burgundy control the lion’s share of the market, however, Tuscany and Barolos wine from Italy is also highly regarded. When looking to emerging regions, it may be savvy to set aside a sizeable percentage of your portfolio to wines from Chile, California, and Australia, as these are the regions that have seen the biggest gains in the last few decades. There has been much speculation that the Bordeaux wines are currently in an imminently ending bubble period which started around mid-2011, when investment from Asian markets significantly increased. It would therefore be wise not to invest solely in this region, despite its 75% share of the global secondary market.
Next, decide where you want to buy your wine from. There are a number of channels available to you here, such as in-person auction houses and speciality stores. It is worth noting that many of the options include commission or buyer’s premium charges, which can range anywhere from 2-25%. Despite this, buying through one of the online exchanges mentioned above, such as Liv-Ex or Cavex, can help to streamline the service, as well as reducing the need for in-person attendance. There is also the option of buying directly from the châteaux or vineyard itself, however, there are often a number of regulations involved in buying from international wineries which will limit availability somewhat, therefore it pays to research these beforehand.
Once the wine has been purchased, the next step is to decide how you wish to store it. Storage is key to securing long-term returns with investment wine and therefore should not be taken lightly at all. In order to preserve and increase in value, fine wine needs to be stored in optimal conditions so as to not degrade in quality. To this end, you may elect to store wine at your own home or facility in a climate-controlled storage area; such as a wine cellar or electric wine cooler. Alternatively, wine can be stored in bonded warehouses, operated by specialist wine storage companies. This option is more expensive in terms of both storage and insurance costs; however, it guarantees the most advantageous and secure storage conditions for your investments over time.
Finally, when the time is right, all that remains is to sell the wine on and collect the returns. There are three main options here. Firstly, both in-person and online auction houses are amongst the most popular venues for secondary market sales and can usually be relied upon to attract buyers. It’s worth noting that online auction houses are likely to charge lower commission rates than physical ones. The wine exchanges also offer selling services and are great places to scout potential buyers for your wine, although the commission they charge can be up to 10%. Finally, there is the option of simply selling directly to another private collector, thus removing the need for a proxy. This is the most direct route, but it does leave logistical considerations solely in your own hands.
Following these tips will get you well on the way to immersing yourself in the world of investment wine. Whether as an avenue to securing reliable medium to long term returns, as part of a genuine passion for wine, it is a greatly rewarding enterprise for investors worldwide.