This article is brought to you in partnership with Vinovest
In our modern era of Bitcoin, Amazon, and Zoom, investing in something timeless or tangible is rare. Something with a story told long before we were here and will continue well after we’re gone. Wine is one of those opportunities. Very few people know that you can invest in wine. Lafite Rothschild, Sassicaia, Tignanello, Bollinger, all wines that enthusiasts herald, are also remarkable investment plays. Supply cannot meet demand, and vintages rise in value on the secondary market as they age.
We’re explaining this incredibly unique alternative asset class with five reasons to invest in wine.
The Returns Are Compelling
Done properly through a portfolio advisor, wine investing can be incredibly stable. If you track the returns of various wine indices through time, they operate independently from bond and equities markets. They also carry far less volatility. Liv-Ex’s Burgundy 150 index, comprising the wines of the famous region in France, has gained 79.35% through the last five years. At 15.87% annualized gains, it has outpaced the S&P 500’s average annual increase of around 10% throughout its existence.
At Vinovest, the median annualized returns for client accounts were 17.83% in 2020. As with all investing, the return potential is predicated on concentration and risk tolerance. Tuscany, for example, saw an annual return of 16.9% in 2020.
An investor note: As a stock market guy myself, I am well aware that these returns don’t compare to some of the incredible gains buyers made in the stock market in 2020. What’s important to remember is that isn’t the way it usually goes. For every successful boom stock, like Zoom, there’s one that craters. Vinovest focuses on risk-managed, quality portfolios. Wine investing is equivalent to blue-chip stock investing. It competes with the averages of the market through time.
The Economics Are Simple
Whereas the stock market requires constant due diligence of a company’s underlying financial performance through time, wine is primarily rooted in supply and demand. A good vintage, which not only receives high marks upon release but carries a historical track record of consumer interest, becomes set to rise in value.
Imagine a popular stock like Tesla that can’t make any more shares. The shares that exist are all there is. That’s wine – a good vintage is a good vintage. Winemakers can’t make more of it. As collectors and drinkers alike begin depleting the supply, the values of the remaining bottles rise. It’s that simple. Factor in the impact that aging a bottle of wine has on its consumer appeal. That’s wine investing in a nutshell. As buyers consume the bottles of a highly coveted vintage, the remaining bottles rise in value.
Modern Tech Has Made It Available to Everyone
Many are not aware of the potentially lucrative returns of this alternative asset class. Historically, it’s carried some significant barriers to entry. Most of us don’t own world-class wine cellars. We are not master sommeliers, and we don’t have access to large auction houses and merchants’ pricing data.
Modern technology has democratized the process, where you can now use online investment platforms – like Vinovest – that manage the procurement, storage, and insurance for a wine collection. You don’t need to have a cellar or know everything about Cheval Blanc or Chateau Margaux. All of that is covered by a small management fee.
Wine Investing Is Passive Income
If you can learn anything from Warren Buffett, it’s that time is your friend. Once you have acquired a wine, all you have to do is wait for it to age and become more scarce. There are, of course, moments where prices of certain bottles will take off early, but the simple mechanics of supply and demand drive prices over time. When you’re invested in stocks, you have to keep track of earnings, management, sales growth, etc. For wine, most of the research is done in the beginning.
Once you own it, you can sit back and let your money work for you. Who doesn’t like building wealth while sleeping?
You Actually Own Something
How often do you get to invest in something that is a passion? With wine, you’re investing in craftsmanship. It’s something tangible that people have devoted their lives to making.
If you buy shares of Ford and the stock goes down, will they give you a Mustang to say sorry? No! If you invest in Apple and they report bad earnings, are they sending you a MacBook? Certainly not. However, if you invest in a wine that doesn’t perform the way you want, you can still drink it! Fortunately, the team at Vinovest work hard to ensure that doesn’t happen.
In our modern world of tech, everything is so fast-paced. It’s easy to forget that the best things take time. Quality investments come from quality products. Wine investing has been primarily reserved for the affluent and people within the industry who know how it works. Times are changing. Now anyone with an internet connection can invest in wine.
David is the Community Manager and in-house investment junkie at Vinovest, an investment platform for wine. Having previously written for stock market publications such as Jim Cramer's TheStreet, SeekingAlpha and The Motley Fool, David fell into the coolest gig on Earth at Vinovest, where he gets to combine his investment/writing background with the wine industry. When he's not working, you'll find him on the golf course, playing the piano, or cooking his life away.