How to Make a Low Risk Fine Wine Investment

Best Investment for Long Term Growth, Vintage Wines from Bordeaux

Nov 11, 2009

Vintage wine may be seen as a risky alternative investment, but the right portfolio can offer good long term growth when bought through a fine wine investment company.

Alternative markets like fine wine are often avoided by investors. Unlike stocks and shares, where company results can be analyzed and brokers consulted on the best deals, Bordeaux vineyards have no equivalent statistics. It is also something of a leap of faith to invest in a liquid which needs to stay in the bottle for at least 10 years before it can be drunk and then, on opening it, what if the wine is corked?

Fine Wine Investment, Alternative Markets

Records going back over hundreds of years show that fine wine is one of the most stable forms of investment in the world and outperforms many other types of investment. As an example, according to UK based investment company Premier Cru, £10,000 invested in a managed wine portfolio in January 1990 was worth £169,845 in July 2007; the same amount invested in the FTSE 100 was worth only £49,150.

It is important, of course, to get the right advice as most people know little about the fine wine market. Using a specialist wine investment company is therefore a sensible way to approach an investment in vintage wine.

Bordeaux, Best Investment for Fine Wine

While it is possible to buy great quality wines from the New World, most experts still consider France, especially Bordeaux, as the home of fine wine. Vineyards produce limited quantities every year and demand almost always outstrips supply, a sure method of keeping prices high. Add to that the recent demand for fine Bordeaux from Asian, American and Far Eastern buyers in the last ten years and stocks are diminishing fast as these new buyers are actually drinking the wine rather than sitting on it as an investment.

The beauty about owning a portfolio of wine containing bottles from the finest houses like Château Latour or Mouton-Rothschild is that, apart from the pleasure of watching the investment grow, buyers can always drown their sorrows by quaffing a few bottles if prices do, for some reason, crash.

Advantages of Investing in Fine Wine

Aside from its potential for low risk and high gains, fine wine offers other advantages:

How to Invest in Fine Wine

Choose an investment company that realizes its profit based on performance of a client’s portfolio; an annual management charge of 1.5% is common. The best companies will offer a variety of investment plans, for example, capital lump sum investments, monthly income plans, school fee plans, wedding plans and pension plans. At least £5000 is required to start a fine wine portfolio as wines are purchased by the case and, with prices for the finest houses starting at around £1500 per case for en primeur wine (purchased the first summer after harvest), this amount is needed to buy at least three to four cases across different price points for a sensible initial investment.

With an investment of £10,000 a good portfolio of around 20 cases can be purchased including wines from one of the top 5 French houses and some of the lesser known but cheaper vintages. Buyers have to wait a couple of years before the en primeur wine is ready to be bottled, then it is shipped to climate controlled warehouses, at which point a charge is made per case to store the wine and provide insurance for spoiled wine, theft or damage in transit.

Buy Vintage Wine as an Investment

Take a relatively low risk by considering an investment in fine wine. At best, profits will soar; at worst, the investment can be happily consumed, which is more than can be said for stocks and shares.

The copyright of the article How to Make a Low Risk Fine Wine Investment in Investment is owned by Helen Smeaton. Permission to republish How to Make a Low Risk Fine Wine Investment in print or online must be granted by the author in writing.