14 December 2016
What is wine investment?
If you are thinking of starting your own private cellar or wine investment with a professional organisation, below are the basic steps to consider.
- Choose your wine investment purchases, within your financial means.
- Lay down your wines within appropriate storage.
- Await appreciation.
- Sell your wine at the correct time.
- See your financial returns.
Ok, so it’s not quite as clear cut as this, but it’s the perfect guide to build upon each point. The key to all are educated and well-informed decisions, to minimise your risk and maximise your gains.
Choose your wine investment purchases (sensibly)
Unless you have a wealth of fine wine knowledge and excess to a multitude of market data, the best approach for this is via a professional within the wine trade. An educated, experienced, knowledgeable and informative approach is imperative. This approach also eases the heart-over-head path which can be semi-destructive to your investment. It is intimately an asset, after all, and because you may love a certain bottle, it doesn’t mean it has the means to appreciate. Nor have the liquidity necessary for ease of sale and ultimately exiting your investment.
Lay down your wines within appropriate storage
You, or your investment advisor, should only ever buy cases that are stored under bond and in original cases. This is where many amateur investors have lost value. Professional storage, within a bonded warehouse, means your wines are, firstly, exempt from duty and VAT taxes, secondly, kept in optimum conditions and, finally, have a traceable line of paperwork from purchase. Owning wines in original cases is imperative as, once the cases are split, the value and upside potential instantly depreciates, relative to the full cases.
We work with 2 professional warehouses:
England: London City Bond (Vinotèque)
The simplistic view to this is that educated wine choices will ultimately appreciate as they mature and improve. An investment advisor can broaden the picture here, with access to further market data and insight.
Market factors that influence value:
- Acclaimed critic scorers and reviewers
- A bubble in the market for a particular wine or producer
- Demand for a particular region
- When a wine purchased en-primeur (when still in cask) is due to come onto the ‘physical’ market
- Removal of tariffs for a particular country (potentially India soon, and Hong Kong in the past)
These are all notable areas one needs to follow closely, sometimes having significant effects on the appreciation potential of your portfolio and when to sell.
‘Time’ remains the fundamental element influencing the appreciation of wine investment, as someone in the future is willing to pay a premium to you for having held a physical good which became better over time.
Sell your wine at the right time
Timing is everything. Say you have a ’10-year plan’ agreed with your investment advisors. This does not mean that selling at the 10-year point is always sensible. One wine in your portfolio may seem a worthy 10-year prospect, however, for example, it may seem that the value of another case is nearing its peak after 5 years. The majority of the time, fine wine investment specialists are best placed to make those calls. As with all assets, buying and selling at the right time is vital. The difference between an amateur and professional investor is not particularly when to buy but when to sell.
See your financial returns
This one’s fairy self-explanatory!
On a final note, it’s important to remember that wine investment can also be fun. If you’re a wine lover, you can always drink some of your portfolio with the profits of others.
Even for those with limited current knowledge, or have yet to find the great enjoyment potential of wine, it is a great way to learn more.
Finally, wine investment through a company like Cru Wine Investment will get you invited to many fun activities, such as wine tastings and field trips in Bordeaux (exclusively for our clients). Check out our trip of May 2015: http://cruwineinvestment.com/fantastic-cwi-bordeaux-trip/
If you would like to receive more information on wine investment, drop us an email on: info@cruwineinvestment, and one of our specialists will get in touch.