What People Need to Know About Investing in Wine

Typically, investing involves putting money into assets like stocks,
bonds, and funds. But you may also be able to benefit financially from
alternative investments like wine, provided you know what to look for and where
to find the excellent ones.

Let’s dive deeper into
the subject of investing in wine, even if you don’t have it in your portfolio
yet.  

Wine and
Diversification

Investing in wine
provides a great and unique way to diversify a portfolio. Like any other
alternative asset, wine offers the potential for high returns with a low or
negative correlation to conventional investments such as stocks and bonds.

Many investment
professionals agree that diversification is crucial. By putting money into
tangible investments like wine, you’re buying an asset whose value is
determined by factors that are barely correlated to the economy’s performance,
interest rates, company earnings, or investor sentiment.

Wine’s value depends on
factors that intersect with supply and demand. Those factors include weather
conditions, harvest yields, vintage, and consumer trends. Since those factors
have no relation to the general stock market, investors can complement their
traditional portfolios with wine.

Determining Suitable
Wine Investments

There are a few things
you can do to make sure that the wine you’re looking at is excellent for
investing:

1.   
Check the Vintage

Vintage refers to the
year in which the grapes were picked or harvested. The harvest quality varies
every year, with the weather mainly affecting the grapes.

Investors who know a
thing or two about investing in wine properly understand that they should take
note of vintages with the best production of that beverage.

2.   
Learn the Wine’s Aging Potential and Longevity

A wine’s aging
potential is directly related to its quality, making it another vital factor to
consider. The type of grape, acidity level, and tannins can impact a wine’s
potential to remain drinkable. You can also check a producer’s history of
producing well-aged wines.

As regards longevity,
it is usually different for every wine. Investable wines often improve ten
years after bottling, although some wines can mature longer than that while
increasing in value and quality. Other wines are only enjoyable to drink for a
shorter time after they mature completely.  

3.   
Review the Producer’s Reputation

The wine producer’s
reputation plays a significant role in the wine’s potential to appreciate
value. Many investment-grade wines are provided by top producers such as
Domaine de la Romanée-Conti (DRC), Pétrus, and Château Mouton Rothschild, and
from regions like Burgundy and Bordeaux.

4.   
Look at Scarcity and Price History

Wine scarcity tends to
provide a boost to the value of the vintages you’re holding. On the other hand,
a wine’s price history shows the trend in value, with investment-grade wines
moving steadily upwards.

When you invest in
wine, it’s essential to watch auctions for at least six months or a year. That
way, you can learn more about market trends, pricing, and how different types
of wines are being sold before you venture into the market.

You can find many market sources and pricing
data online, and if you’re a beginner, you should examine such information
thoroughly.