This article is brought to you in partnership with Vinovest
“Invest in what you know.” It’s a mantra coined by one of the most successful and well-known investors of all time, Peter Lynch. The odds are that if you’re browsing SOMM TV, you know a thing or two about wine. Therefore, it’s time to turn that passion into profits with three ways to invest in fine wine.
But First, Why Invest in Wine?
Investments are more than just stocks, bonds, and mutual funds. More people than ever are putting their money in alternative investments – assets that don’t fit into the conventional categories for equities, income, or cash. That includes classic cars, fine art, trading cards, NFTs, and, of course, fine wine.
Wine investing isn’t some frivolous endeavor, though. It may be the missing ingredient in an otherwise perfect portfolio for many people. Fine wine has several unique characteristics that make it the ideal portfolio diversifier.
– High Stability. Fine wine has one-third the volatility of global equities.
– Low Correlation with Traditional Markets. Fine wine has a 0.12 correlation with the S&P 500. As a point of reference, the MSCI World Index has a 0.96 correlation with the S&P 500.
– Recession-Resistance. The S&P 500 fell 22% in the first quarter of the Coronavirus Recession. The Vinovest 101? It barely budged.
– Inflation-Resistance. Commodities are highly inflation sensitive. So, when inflation goes up, so too do wine prices.
– Direct Ownership. Investors own their wine 100% on platforms like Vinovest. Stocks and bonds only exist on paper.
Here’s the kicker. Fine wine’s best characteristic might be its return on investment. Over the last 30 years, it has averaged 10.6% annualized returns. Put another way, you can expect to double your money every seven years. That’s not all.
Fine wine has investors putting their money where their mouth is. Through the first four months of 2022, it has already returned 8.6%. Meanwhile, the S&P 500 is down a staggering 9.37%.
How to Invest in Fine Wine
1. Invest with Vinovest
Vinovest is a digital platform democratizing fine wine investing. (Think of it like Robinhood or Titan.) Founded in 2019, it allows anyone to build, track, and analyze their own customizable wine portfolio. Vinovest makes buying, selling, and storing investment-grade wine easy, whether you’re an investing newbie or a seasoned oenophile.
How It Works
You can invest in two ways. First is the Vinovest Marketplace. It’s a 24/7 live trading platform where you can buy and sell investment-grade wine the same way you buy and sell stocks with a brokerage account. Because Vinovest handles the storage, insurance, and authentication, you can focus on the most important part – investing. (Where else can you instantly invest in Domaine de la Romanée-Conti?)
Second, Vinovest managed accounts. Managed portfolios are ideal for newcomers who want to invest but don’t know what wines to select. Vinovest’s team of wine experts will help you build a personalized portfolio that meets your investment goals and horizons. You just have to kick back, relax, and let your portfolio get better with age.
|– 100% ownership of wine||– Management fees|
|– Wine experts to guide investing||· 2.25% to 2.85% annually for managed portfolios|
|– 24/7 marketplace||· 2.5% buying, 1% selling, and 1.5% storage for trading portfolios|
|– Android and iOS apps||– Managed accounts may take two weeks to fill|
2. Invest in Wine Stocks
You can still call yourself a wine investor even if you don’t own a case of Screaming Eagle or Domaine Leroy. Wine stocks provide indirect exposure to this highly liquid asset. (Pun intended.)
Take LVMH ($LVMUY). The publicly-traded company owns world-class brands like Château d’Yquem, Dom Pérignon, and Krug, to name a few. By investing in LVMH, you’re supporting these wineries in a sense.
Historically, wine stocks deliver generous returns over the long run. They’re not for everyone, though. Investors must grapple with the risk of potentially losing their entire initial investment in the case of a severe market crash.
How It Works
There’s no shortage of ways to invest in wine stocks. You can pick them yourself on self-directed platforms like eToro and Robinhood. Or, if you prefer experts to handle it for you, open an account at a firm like Vanguard, Fidelity, or Prudential. Wine stocks offer a fast and straightforward way to add some reds and whites to your portfolio. Just don’t expect to drink them.
|– Potential dividends||– Higher volatility|
|– Exposure to wine producers||– Higher risk|
|– Lower cost of entry|
3. Collect Wine Yourself
Collecting investment-grade wine comes with high barriers to entry. Really high. But, if your pockets are deep enough; if you have a comprehensive knowledge of vintages, regions, and producers; if you know the insiders with access to great wine, then this option is for you.
How It Works
Wine collecting gives you complete control. That starts with your cellar. According to Home Advisor, the average homeowner pays $40,000 to build a wine cellar or walk-in wine cave. These customized spaces provide a climate control environment to age your wine to perfection.
Next, pour a glass of your wine and pull up the computer. It’s time for some research. You’ll want a good mix of established and upcoming wines. Target everything from blue-chip Bordeaux to emerging estates from China, Chile, and California.
Finally, it’s time to buy. Auctions, brokers, specialties, and wine exchanges rank among the most popular venues. Just beware of the sizeable commissions. Christie’s New York charges a 25% buyer’s premium! If you fancy yourself a well-connected investor, go straight to the source and buy from the winery.
|– Complete control and personalization||– High upfront cost|
|– Instant drinkability||– Higher risk of fraud|
|– Collection can complement a passion or hobby||– Commissions (can be 10%+)|
The Bottom Line
For centuries, only the ultra-wealthy could invest in fine wine. Recent fintech innovations have substantially lowered the barriers to entry. Platforms like Vinovest and Robinhood make it a snap to invest in fine wine or wine stocks, respectively. Of course, collecting bottles yourself will never go out of style.
Whatever your choice, it’s time to invest in assets you appreciate.