150% – it’s an exceptional return on investment, and it’s also far from uncommon in the world of fine wine.
Wine prices are rising and rising (with an unprecedented 20% jump in the last 12 months alone), and so you may find yourself in good and growing company if you’re considering investing in this refined realm.
But before you move ahead with your first investment, and enjoy a premature chink of glasses, there are important fundamentals to grasp. The following eight facts may be the difference between a vintage year for your investment portfolio, and the equivalent of a fine wine left to go bad:
1- Investing in wine is more advanced than you may realise
Fine wine investment is no longer a practice of buying in-person from a traditional wine centre – far from it. Online trading platforms are becoming more sophisticated, more diverse and are growing in number.
Make no mistake fine wine investment has well and truly entered the 21st century. Today, you can buy wines in bond, by using brokerage services, through fund investments or via wine ‘futures’ (known as ‘en primeur’).
2- Keeping an eye on the market is easier than ever before
Alongside the advancement to the fine wine investment market has been the introduction of indices that track the market, as delivered by Liv-ex.
The Liv-ex platform is currently targeted at wine merchants (although it’s available for private investors too); it provides data and prices on almost every fine wine available – truly invaluable for ensuring that your next purchase, is a wise and informed one.
3- Just as with any investment, peaks and troughs are to be expected (but entry-level investments are relatively low)
Nick Martin, CEO of Wineowners.com (a website for tracking, valuing and trading fine wine) has previously said that their users own wine worth of between £1,000 and £2m, highlighting fine wine as a relatively accessible form of investment. It’s then entirely possible to dip a toe into this area of investment for trialling the highs and lows. And it’s true to say that there are indeed highs and lows. Despite recent performance involving a 20% rise over the course of 12 months, a fall followed in 2013.
Explaining these peaks and troughs is the state of the wider world. In times of trouble, gold undergoes rapid rises (thanks to it being seen as a safe haven), while on the flip side (during times of financial stability), investors flock to other forms of luxury goods, such as fine wine.
4 – A savvy, well-chosen fine wine investment requires an equally carefully selected storage solution
You may understand the demanding conditions of optimal fine wine storage. Yet like the vast majority, you may remain blissfully unaware as to just how difficult these conditions are to achieve (and to achieve consistently). Humidity, temperature and air quality, light and vibration and security are each influential factors that could dent or bolster the value of a fine wine investment.
Octavian Vaults are temperature-controlled, robustly secured and, perhaps of equal importance, fully insured.
5- Fine wine is an exceptional choice for portfolio diversification
Property, precious metals, traditional stocks and shares. These three key areas of investment are often where most stop when it comes to diversifying their portfolio.
Yet each could be equally impacted by another global credit crisis. Like gold, fine wine is tangible and owned in whole, however you can also benefit from tax efficiencies, such as not being subject to capital gains tax, thanks to wine being considered ‘wasting chattel’ – a good that won’t last beyond 50 years.
6- 84 out of 100 wines on the Liv-ex Wine 100 are from Bordeaux
Fine wine investments overwhelmingly involve Bordeaux wines, accounting for 84% of the Wine 100. This has dropped from a previously sky-high 95%, as of 2010. Despite this however Bordeaux are said to be becoming less important when it comes to the auction house, with auctioneer Acker Merrall reporting Bordeaux sales accounting for just 30% of his auctions.
7- Brokers don’t charge commission (until you’ve completed the sale)
You shouldn’t face consultation charges or buying fees from brokers. They should only charge when a wine is sold, at which point their fee is capped at an industry standard rate of 10%.
8- If you need a sure-fire opinion on which fine wine to invest in, listen to Robert Parker
American fine wine critic Robert Parker is an important voice in the industry – his so-called ‘Parker Pint Score’ is directly correlated to the selling value of vintage wine.
Another voice to listen out for is that of the Financial Times’ Jancis Robinson.
This Sponsored Guest Post was provided by Octavian Vaults exclusively for Social Vignerons.
10,000 private collectors, investors and wine merchants from 39 countries choose investment grade storage for their collections at Corsham Cellars, some 100 feet below the Wiltshire Hills.
Learn more on OctavianVaults.co.uk