Whether for financial purposes or pure pleasure, wine investing is a hit among those with the resources to procure precious vintages.
This past week, United Kingdom-based news agency BBC gave seven tips about wine investing, an arena which is, according to reporter Oliver Pickup, “one of the best performing asset classes of the last 20 years.”
For starters, the BBC recommends investing money which you can stand to lose and, BBC said, wine investors should plan on diving into their endeavor with at least $15,000.
“The same rule for any investment, or indeed gamble, applies: do not use money which is likely to be necessary for your living in the short to medium term,” Pickup wrote. “Only spend what truly won’t be missed. Returns are not guaranteed.”
When making the decision about which wines to select, pick the “very best you can afford”, Pickup noted.
Pickup recommends wines which have a track record of good performance – France’s Burgundy, Rhone, Bordeaux, and Champagne; the Super Tuscans and California’s finest Cabernets were all examples Pickup gave.
“A smaller quantity of the finest wines will serve you better than cheaper cases which will hit you in the pocket when you (total) up the annual insurance and storage charges,” Pickup said.
When you’ve selected the wines you want to buy, shop around, Pickup said.
“When buying for investment it’s vital to shop around and sniff out the best market prices,” he wrote. “Make sure you do your homework.”
Be prepared to hold on to your purchase for at least five years, Pickup recommended.
“Fine wine investment has almost always produced positive absolute returns in every five-year holding period, ever since the first recorded, back in 1999,” he wrote.
This growth is due to the fact that fine wines are limited; there is not an endless supply, Pickup said. Over time, these wines will “become rarer and more desirable,” he wrote.
Proper storage of your investment is also important.
Pickup (in British-speak) said your wines should be stored in a “bonded, ‘duty-paid’ warehouse such as London City Bond or Octavian vaults.”
Bonded warehouses, he said, are carefully regulated and provide optimal conditions for storing valuable wines.
Also keep up to date on your wine’s insurance coverage, he said.
Beware of en primeur wines, Pickup noted. Known as “wine futures”, en primeur buys involved acquiring wine which is still in the barrel and has yet to undergo bottling and delivery.
“Buying en primeur means committing to the wines when they are at their youngest – with all the maturing to do, before the final blend and oak-ageing is complete – and is fraught with risk,” he said.
Pickup’s final piece of advice is to be aware of the tax benefits of wine investment, and to speak with your tax adviser about your acquisitions.