Is Wine A Good Investment?
Investment in wine
Investments are a great way grow financially. However, with the current economic climate still so rocky, retirement funds uncertain, and products becoming more expensive, investing has become a much harder game to play. Indeed, the financial environment has changed drastically since the millennium, and will no doubt keep changing.
So, keeping this in mind, alternative methods for investment are worth considering. While not a new idea (in fact it is a very old method), wine investment is something to take into consideration, and here is why:
- Wine is a physical and tangible asset, while stocks are volatile and uncertain in this current climate. However, bear in mind you do not have the financial services compensation scheme if things do go wrong. Therefore, to ensure you don’t make an expensive mistake, it might be best to start small if you have a lot to lose, or just want to start investing in wine as a hobby.
- Although wine prices fluctuate, the wine will only increase in price with age so you can decide when to sell the wine to gain the best return on investment.
- Wine is relatively easy to trade, after all even someone outside the industry understands the value of a famous fine wine. There are also plenty of associations and websites that allow you to trade worldwide.
- If not stored correctly wine can spoil and you can lose your stock. We recommend paying a professional wine storage facility, such as Octavian Vaults, to take care of your wine.
How to Invest in Wine?
- Wine merchants
A wine merchant is someone who sells you wine, therefore you should always ensure that they are reputable. Wine trade is unregulated; therefore, it is easy for scam artists to con naïve investors into investing in dodgy bottles of wine.
Wine merchants do not charge a direct fee for their services. Instead they take a 10-15 per cent margin on the wines they sell to private investors. This cost is priced into your purchase.
- Trading Platforms
There are a range of website which are aimed at both buyers and sellers. Cavex is a website which allows you to do both, and is also a good source of information about wine.
- Wine funds
Wine funds are investments where you outsource all responsibility to a fund manager. They spread your risk among many different types of wine, and also remain free from any biases from wine merchants.
However, these funds operate as unregulated collective investment schemes and the financial regulator, (the Financial Conduct Authority), has warned they should only be marketed to sophisticated investors.
They do not have protection from the Financial Services Compensation Scheme.
However, with a wine fund, you do not own the wine and are only trading on the value of the market.
This is only an option for the very wealthy, as the minimum investment is usually around £10,000 and there are also annual management charges and performance fees to consider. Also, once you try to take your money out you will have a CGT liability, which you do not have with a direct investment.
If you are interested in investing in fine wine, here are a few useful websites which we recommend you read:
Wine Owners: An online wine collection management platform and trading community for people who love and collect fine wine.
Octavian Vaults: A famous wine storage company whose blog provides useful information and investing and storing wine.
Wine investment Association: The association was created as an industry response to growing public demand for higher professional standards in the promotion of fine wine as an investment asset class.