What are the Benefits of Investing in Wine?

Jeremy Laukkonen

Investing in wine can involve buying shares in a managed fund or purchasing bottles or crates individually. Using a managed fund to invest in wine can offer the benefits of expert knowledge and potentially high yearly returns. Wine fund managers typically look not only at the quality of a vintage, but at the original production volume, how much inventory is left, and the rate at which similar wines have appreciated. This type of intimate knowledge of wine investing can potentially result in large financial gains. Personally buying crates and bottles of wine also has its benefits.

Bartender serving a glass of wine.
Bartender serving a glass of wine.

A managed wine fund can be a valid investment option, regardless of a personal taste in wine. Just like a mutual fund, investing in wine through a collective portfolio can offer the benefits of expertise and diversification. A wine fund manager will typically purchase a wide variety of different vintages so that the fund as a whole can remain unscathed if a particular wine drops in value. Returns can be quite good, and the average appreciation of fine drinking wine is about 15% each year over a 50 year period.

Sparkling wine.
Sparkling wine.

Wine funds can also allow for the investment in particular vintages on speculation. Some wines are very highly acclaimed but produced in such small quantities that they may never achieve a large following. A wine like this may appreciate greatly due to its high quality, or not at all simply because few people ever get to try it. A well managed fund may be able to take the risk of buying several cases of such a vintage, since the fund as a whole will not suffer if it does not appreciate greatly.

Private investors may also see a number of advantages from investing in wine. Unlike stocks and other market driven instruments, wine tends to be a known quantity that will not fluctuate in value to due outside forces. There can still be risks involved, since a bad review of a previously valuable vintage could reduce the price people are willing to pay for it. Values may also drop in the face of a bad economy, if people do not have the money to spend on fine wine.

Despite potentially large gains, investing in wine can come with many of the same risks as other speculative activities. Wine funds may help reduce the risk, though private purchase can result in the buyer at least being able to drink his investment if things go wrong. This can make investing in wine an interesting activity for people that are already oenophiles, since it can offer potentially great rewards at best and a cellar full of fine vintages at worst.

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