Wine Investment: Pros and Cons

Top wines in the world fetch amazing prices. Quality wines have the potential to gain incredible value in a few short years. Global demand for many vintages has increased significantly over the last several decades. Wine investment can often be an incredible opportunity for those who understand the market. If you are looking to invest in a winery, rather than wine, check out these unbelievable wineries!

The global market for wine is growing substantially, both among local and foreign markets. For example, since the rise of the Chinese middle class, the country has been importing and selling massive amounts of wine.   Wine investment in North America crashed in the year 2011 after a huge push in the year 2009. Many wealthy individuals worldwide crave the luxury status associated with incredibly rare vintages. The purchase of luxury bottles of wine in China for example has gone up almost 50% in the past few years. Many buyers worldwide are continuously seeking out elusive bottles of wine. These buyers are drawn to historical regions, vintages and even some of the world’s greatest producers as well.

Investing in wine requires an extensive amount of research. Buying from only verified sources is recommended. However complicated, it can be quite lucrative when done by an informed, savvy investor. Getting your hands on the right bottle of wine and selling it at the right time can result in massive gains.

Pros Of Wine Investment:

Taxes/Fees:

Wine investment offers advantages in associated taxes and fees. Traditional forms of investment often require capital gains taxes and fees on trading and more. The only fees generally associated with buying and selling wine are tariffs associated with trading across international borders as well as the shipping costs. Obviously, there are storage costs as well, but these are minimal. The most experienced sellers find ways to reduce these fees by storing wines in a bonded warehouse. Furthermore, these fees can be reduced by selling portions of wine in larger bulk orders only. Ultimately, the fees for shipping are only small transaction fees considering what you might pay for wealth management or regular trading costs. Any of the money that you make off of wine investment isn’t subject to capital gains, income or inheritance tax.

Stable Investment Strategy:

Investment in wine offers a fairly stable investment strategy. Although wine investment can face downturns like any other market around the world, the prices of fine wines tend to consistent over time. If you are picking up a few bottles for an investment, as more of that same vintage continue to be purchased and consumed, your bottle of wine will only increase in value. The given stock of good vintages of wine is always finite. When a bottle of wine has extensive demand, it often commands amazing prices for an asset stored with minimal upkeep.

Reasonable Returns:

Wine investment can offer very reasonable returns. Investment over time has shown to produce an average annual return of roughly 10%. In juxtaposition to mutual funds and other  assets on the stock market, regularly investment in wine can constitute one of the fastest-growing aspects of a portfolio.

Owning Assets:

Being able to own a physical asset is a valuable opportunity. Owning a digital currency or stocks is never quite as exciting as owning your own assets. Having a tangible asset that can be sold locally or even consumed if demand for the bottle has decreased gives the investor options. Having full ownership of your assets is not always the case with managed funds.

Cons Of Wine Investment:

Monitor Quality:

Properly store wine to protect investment. Quality of wine will change over time. This means properly protecting your wine against temperature and humidity concerns, light, vibration and more. Without the proper preparation and care you will devalue wine in storage. In some cases, wine can devalue with time. Knowing when buyers most demand that vintage  is a key to maximization of wine investment.

Insurance:

Large amounts of purchased wines require insurance, like any physical assets. Ideally, insure your wine cellar or facility used for storage. Adding the wine that you have been storing as part of your home insurance can often cut into profits. However, if storing at home, it is necessary for protecting your investment in the event of a serious accident.

Consumption:

It can be tempting to consume your wine inventory. Temptation to consume is always present. A strong will and patience is crucial to wine investment, as with any market. Wine investors can and should purchase vintages intended for consumption, if this may be a problem.

Counterfeiting:

Counterfeiting has become a large issue within the industry. Private sellers can be a dangerous risk. Use trusted sources only. Demonstrating the authenticity of a bottle of wine often requires written proof of origin. In the event of bulk purchases such as cases and crates of wine, testing a single bottle is recommended to verify authenticity. Counterfeit wines have even found themselves in some of the largest auctions in the world. Ultimately, verification of authenticity prior to purchase is crucial. Protect your capital!

Can Be Challenging To Sell:

Wine is an investment that can sometimes be difficult to get out of. Liquidating a section of your cellar can often take months. Many wine investors that have to get out of their investments often turn to licensed auctioneers that will take a cut of the sales. Often difficult to liquidate, a consistent connection to a network of buyers is a must!

Investment in wine has many pros and cons. It can make or break a financial portfolio, however, it is a great investment option for a vast amount of individuals. Keep these pros and cons in mind when you next invest in wine, or if you decide too and stay ahead of the market. Good luck!