How to Invest in Wine – The Fine Art of Diversifying
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Fast Facts
Purpose:
Portfolio diversification
Ways to invest:
Physical bottles, stocks, future, funds
Cost:
Depends on the platform
Risk:
Riskier than investing in stocks and bonds
Ideal portfolio allocation:
Upto 20%
If you are up to date with the long-term goals and investment strategies and have additional cash to allocate to alternative investments, you might want to consider investing in wine. Many people like to add alternative assets to their portfolios as it offers diversification and helps generate returns that are not limited to the stock or bond markets. They also provide ample growth and help beat the mundane allocations. Even Warren Buffett endorses wine and considers it a safe haven for your money with minimal correlation to the stock market.
Wine investment will provide you with an asset with strong growth potential and is also tangible in many cases. On a lighter note, if the price falls or the fine wine investment is not what you hope for, at least you can drink wine and enjoy the taste. If you are keen on wine investing, here is everything you need to know about it.
In this article
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What is wine investing?
Before you start investing, it is essential to understand how the market functions. When we say wine investing, you purchase bottles of wine that will show the potential to gain value with time. Many varieties are in-demand and rare. You cannot make money from wine investing if you go to the grocery store and bring home a bottle of wine for $10.
The areas of Burgundy and Bordeaux in France used to dominate wine investing in the past. As time passed, investing in different varieties of wine from across the globe became easy. The varieties from Rhone Valley, Australian wines, Italian wines, and American Investment wines have gained high popularity. These regions are known to produce high-quality investment-grade wines, and you will easily find wines that have the potential to grow in value with time.
The investment is a great choice for those who think the wine market has a solid future. More and more people are keen on investing in wine, and the age of an average wine buyer at an auction is in the 40s. As people gain interest in drinking wine, it could offer higher market opportunities to those keen on making money in the expanding market.
Wine investment is also attractive to those who love wine and want to diversify their portfolio with an alternative asset. However, wine is a great long-term investment, but it does not offer liquidity like many other investments that allow you to quickly turn the asset into cash. You will have to hold the investment for at least a few years to enjoy high returns. It does offer the potential for high returns.
The wine portfolio has offered an annualized return of 13% over the last 15 years and is less volatile than other investment products.
Related: Assets That Appreciate in Value
Examples of quality wines
Different wines are available in the market, including white, red, sparkling, and dessert wines. In most cases, red wines can fetch the highest prices. If you are ready to start investing in wine, it is a great idea to think of varietals and vintages from the manufacturers that have generated strong returns in the past. Here are a few you can consider:
- Brunello wines made from the Sangiovese grapes
- French Grand Cru wines, including Haut-Brion as well as Lafite Rothschild
- Napa Valley Cabernet Sauvignons like Screaming Eagle’s wines and Old Sparky from Schrader Cellars
- Barolo wines from Italy are also top-rated investment options
One place for all your investing
Options Trading
- Get up to a $0.18 rebate
- No commission or per-contract fees
High-yield cash
- Earn 5.1% APY*
- No fees. No subscription required.
Bonds
- 6% Yield or more
- Explore thousands of bonds yielding 6%+
Ways to invest in wine
You can invest in wine in many ways and choose the options based on your situation, financial goals, and budget. Here are a few ways to consider.
Wine bottles
You can buy wine bottles on your own, which can be done through wine auctions or the secondary markets. You can also buy directly. It is possible to purchase and sell wine through well-known websites like Christie’s, Sotheby’s, and WineBid. But a commission will be applied if you want to resell the wine bottle through the auction house. If you choose to invest in wine bottles, you will need space to store them properly. Create a wine cellar so the bottles can be stored at the right temperature. You can also buy insurance for it.
Investing in wine bottles will need a lot of knowledge because it is possible to buy any wine bottle for as low as $35. Choosing the right type of wine will make all the difference. It helps to understand which winemakers have the potential to generate high returns with time.
Wine futures
You can also invest in wine through wine futures. It is also known as “en primeur.” You can buy the wine before it is bottled, which means you purchase it while it is in the barrel. You will own the wine from its first release. It is possible to have many choices when buying wine futures. You can also buy a new vintage.
However, wine investors need to keep in mind that their wine will not ship for the next two years, 2025. Based on the wine, you can invest in wine futures for as low as $200. Wine futures can be purchased through Sotheby’s, and you will also need space to store and maintain the wine at the right temperature.
Wine stocks
Instead of purchasing wine bottles, it is possible to invest in wine by buying the stocks of wine producer companies. When you buy the stocks, you do not have to stress about the bottle's storage and whether it contains the right quality wine. You are only betting on the love for alcoholic beverages and their demand. Here are a few wine stocks you can consider:
- Constellation Brands. The company distributes a range of alcoholic drinks, including wine.
- Willamette Valley Vineyards. The winemaker is based in Oregon and is a leading producer of general consumption wine.
- The Duckhorn Portfolio. The company is a well-known wine producer with brands like Kosta Browne, Duckhorn Vineyards, Migration, Postmark, Greenwing, and Canvasback.
To invest in the stocks, you can open an online brokerage account or invest through any investment app that will allow you to buy stocks. There are wine funds, but they have a long lock-in period, and you will have to make requests for redemption that could take a few weeks to fulfill. Stocks are the easiest to invest in as there is no storage requirement, and you can track the stock performance easily.
Dedicated platforms
You can also invest from a platform that explicitly manages wine investment. It will combine the ability to invest in wine bottles and have someone else handle the entire process.
Vinovest
Vinovest is known for wine investing. It allows you to purchase and sell wine bottles, and you do not need to worry about wine storage. You can also benefit from wine experts handling the curation and start investing for $1,000.
Liv-ex
Liv-ex is another platform that makes buying and selling wine easier. It is a global marketplace with more than 100,000 products listed at a time. You can buy and sell wine quickly and at the right rate.
One place for all your investing
Options Trading
- Get up to a $0.18 rebate
- No commission or per-contract fees
High-yield cash
- Earn 5.1% APY*
- No fees. No subscription required.
Bonds
- 6% Yield or more
- Explore thousands of bonds yielding 6%+
What to consider when investing in wine
There are certain things to keep in mind when investing in fine wine. Here are a few things you must consider.
- Your wine knowledge. It is important to have at least some wine knowledge before investing. You can make inquiries from wine experts and conduct your research but do this before deciding to invest.
- Cost. Consider the total cost of investing in wine, including storage and insurance. You must ensure that the cost is not higher than the expected returns.
- Storage space. You know the importance of storage when it comes to wine investment. You will need a sound storage system if you buy wine bottles.
Pros and cons
There are several benefits of investing in wine besides diversification of the portfolio and a few drawbacks. You may want to consider them before investing.
Pros
- Market-beating returns. Fine wine has managed to weather the financial ups and downs and generate strong market-beating returns. The demand and supply dictate the prices of fine wine. However, the supply is limited since fine wine is an artisanal product made in small quantities. It is different from other types of investments because it is made to be drunk. On the other side, the demand is continuously rising in newer markets like Africa, Latin America, and Asia. Wine has been a top-performing asset for the past few years and even in times of economic uncertainty. Some of the top wines in the world have shown growth as high as 200% over five years. However, wine investment has annual returns of 10% to 15%.
- Low risk. Fine wine is asset-backed, and it is a very low-risk investment. After you bring home the wine bottles, you will keep them in an optimal condition in a warehouse. You may also have insurance for it. The investment has zero correlation with the stock market, making it a stable investment even in uncertainty. The investment will not be affected by a recession or a pandemic. The S&P 500 may fall, but wine investment will not be affected by it.
- Easily accessible. A lot of investors want to know how much amount they need to invest. But high-end wine is accessible to new investors as well as experienced investors. Some companies allow you to invest in rare wine at a low cost. You can invest $10,000 or go as high as six or seven figures. You can also seek the services of professionals who will guide you through every process of investment.
Cons
- High cost of insurance. Investing in wine will require you to pay high insurance costs. Firstly, you will have to set up a wine cellar and pay insurance if you have a high investment. This could increase the overall cost of investment, and if you do not insure the wine, there could be a risk of losing them if an unfortunate event happens.
- Distortion of quality. All types of wine need proper storage to maintain authentic taste. You need to have the right plan in place on where you will store the cases of wine and maintain the right temperature at all times. Consider the humidity and the temperature at the storage space. If you make any mistakes in storing the wine, the quality and taste will be affected, leading to a loss.
- Liquidity. Selling wine is not as easy as selling your stock and bond investment. If you have invested in wine bottles, you can opt for wine auctions, but you will not have the money immediately. When it comes to liquidity, wine is not the one to provide it.
FAQs
What wines should I invest in?
Focus on wines from renowned regions such as Bordeaux, Burgundy, Napa Valley, and Champagne. Look for wines with a track record of appreciation, high critic scores, and limited production.
How long should I hold my wine investment?
Wine typically appreciates over 5-10 years. Some wines can take longer to reach peak value, so patience is key.
Can I invest in wine funds?
Yes, wine funds pool investors' money to buy and manage wine portfolios. This can provide diversification and professional management but often comes with fees and minimum investment requirements.
The bottom line
Whether you invest in wine depends on your financial situation and investment goals. It can make sense if you already have a solid portfolio of stocks and bonds and have extra money to invest. Wine investment will help diversify the portfolio and allow you to explore different asset classes. It will boost portfolio growth and also reduce the risk.
You can also invest in wine if you like it and want to add it to your portfolio. It may take some time to get the hang of wines if you do not know wines. Limiting the exposure to wine to 20% of the total investment portfolio is best.
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Editor
Vandita Jadeja is a financial writer and editor at Joywallet. She loves to read and write about money and brings a decade of experience from the financial industry.
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