Liquid red… or white

24 Apr 2013

Love your wine? Do you fancy a glass perhaps accompanied by a cheese board and a beautiful view? Some people take this a little bit further, choosing to purchase wine as an investment.

Speak to wine professionals and most of them will probably say that wine should never be seen as an investment, but rather something to enjoy and savour. In fact, some have even said that investors destroy the market by inflating prices.

However, there are plenty of fine wines that don’t feature on the list of investment wines – these are the ones to buy to enjoy a glass (or two) with loved ones.

Wine can be a fantastic investment if you do your homework and buy quality vintages. Wine has the potential to appreciate in value with time, allowing you to sell at a small, or sometimes large, profit. While on average it may not bring in the big bucks, it’s definitely something to investigate.

The pros

Wine remains separate from financial markets and let’s face it, it will always be in demand all over the world. Because it’s separate from the financial market, there is very little tinkering with prices. There will never be a crash that suddenly wipes your investment value and you will never experience a bad trade. Plus, your investment is right in front of you; you can see and touch it which means you can ensure adequate care is guaranteed.

Another positive is if you decide you’d rather not sell off your investment, it’s quite a delicious result.

The cons

Selling off your investment can be a disadvantage when it comes to investing in wine. It has limited liquidity and may take some time, effort and research to resell. Learning about the wine industry – what makes it tick and how it works – can be quite time consuming. And research is definitely something that you need to dedicate time to if you plan on investing your money in wine.

Storage can also be a difficult aspect of wine investment. You need to dedicate time and money to ensure the wine bottles are stored in the right space and at the right temperature. The value of wine can rapidly deteriorate if not stored correctly.

Make sure there is no direct light hitting the bottles as strong sun or artificial light can react with the ingredients in wine. The humidity also needs to be just right, especially for those wines with natural corks. In terms of temperature, research shows that 11 degrees Celsius seems to be the most ideal temperature for storage and aging.

Wine investment funds

If you don’t feel comfortable investing in wine on your own, there is an option to join a wine investment fund. This means you’ll make a distribution in exchange for exposure to some of the best wines.

Through this, you can also invest in vineyards that produce high-quality wine grapes, rather than individual wine bottles.

Choosing the right wine

There are some wine brands that are better suited as investments.

Make sure you choose a well-known brand that is known for producing quality wines.

Also look into the history of the company – does it have a history of high prices and how popular is it?

Read up on the brand. What have the critics said about the brand and that particular vintage?

Another important aspect of investing in wine is research, research, research. Read books, magazines, blogs and opinions to understand the market and individual wine manufacturers.  

If you have some spare money that you’d like to invest, wine can be a wonderful opportunity. It can even serve as a perfect excuse for some very pleasant holidays to local and international wine-growing regions.

However, be cautious of using wine as an investment. Wine does not pay dividends, does not earn you any interest or rent and can have heavy storage costs. Dusty wine bottles should not be a substitute for a proper financial and savings portfolio.