The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Keeping Your Investments Safe In Wine
Investing in fine wine and making a profit is a lot more challenging than meets the eye. Buying a few bottles, storing them in your basement and hoping for them to increase in value is not the way to make a fortune. The wine market revolves around specific varieties; particularly, varieties with a solid background such as Bordeaux, Burgundy, Tuscany, and Rhone wines. When it comes to making an investment, a lot of people don’t bother to dig deeper and get to know the market; that’s why they fail. It is important to like the product and have a genuine interest in that product if you want to reap benefits.
Proper investments can diversify your portfolio, and yes, it can be a “safe haven” by the time you retire. But then again, it is equally important to have patience. Just like with any other form of investment, if you want to make money by investing in wine, you must be willing to wait at least 10 years for your product to reach maturity, age well and become valuable.
Done right, investing in wine can be extremely profitable
Never buy wine from independent sellers. Someone claiming to sell a bottle of Chateau Lafite from 20 years ago is more likely a scammer. Good wines come in cases; they’re certified, bonded in a warehouse, insured and constantly monitored. Their value usually increases or decreases the moment the bottles start being consumed.
Novice investors should look beyond the mere product. They should get to know the market before spending any money in order to understand the fluctuations of the market. Even thought fine wine behaves differently than stocks, it’s still safe to deal through a certified wine merchant. A professional in the business will tell you which wines are worth investing and which should be avoided.
A lot of people get into the wine business because of the product’s volatility. Since fine wine is a type of illiquid investment – meaning it can be ruined and there’s nothing you can do about it – investors don’t pay tax. While that might be true, there are additional costs you should be aware of. It’s best to stay safe than be sorry down the road. Consult with a merchant and learn everything there is to know about trading exchange fees on platforms like Cavex and Liv-ex; learn about insurance and broker fees, as well as general costs for storage. Note that proper storage conditions are fundamental in the business. The right temperature, heat and humidity levels will heavily influence the quality of your product.
Generally speaking, it will cost you between $18 and $25 per month to have your cases stored in a proper cellar. If you’re a first-time wine investor who doesn’t want to take a chance, this is your best bet at making a profit.
Acknowledge that there are risks involved
Even though investing in wine might seem cheaper than investing in stocks or bonds that are not necessarily the case. In 2013 the wine market finally stopped fluctuating, and many investors took a risk. Some decided that it was finally the time to invest in “future wines” or wines en-primeur. Others turned their attention to growing international markets in China and the US. Regardless of your choice, you should learn how to spot a scam. Over the past decade wine fraud has become a common endeavor. Don’t let yourself get fooled by offers that sound too good to be true if you want to enjoy a good profit from your investment when you retire, and seek professional assistance whether you’re a proficient investor or a just a newbie.
Getting a “feel” of the market is a lot easier than you think. The secret is to start small, particularly if you don’t have a fortune to invest. Vintage wines from France and Italy, blue-chip wines, and cases with a track record are the best for investing because they have a track record. Wines from 1990, 2000 and 2003 are extremely qualitative; also, check wine scoring system on Robert Parker’s website, and last but not least steer clear of hyped boutiques that claim to trade the best or the best. Just remember, quality wine can be a “safe haven”, but only when done right.
By William Taylor and WineInvestment.com!