Why is wine a good investment? A discussion by Imperial Wines of London Over the years, both in times of economic adversity and prosperity, wine has always been considered to be a safe investment, as values have continued to rise and are determined by its consumption. Wine is frequently seen outperforming the Dow Jones and the FTSE 100, and offers substantial returns on investments, without the investor needing to concern themselves with the volatility of the stock market. Wine is something which should only be considered by long term investors, rather than speculators looking for short term gains, as the value of wine will take time to increase. For those with enough patience, a balanced and well-chosen wine portfolio will typically provide an annual return of between ten and twelve percent. Fine wine is generally seen as an alternative investment, and should make up a part of any well rounded portfolio. In terms of assets, wine is unique, in that it’s consumable, tangible, and benefits greatly from the law of supply and demand. Traditionally, investments made in wine were focused only on red Bordeaux originating from famous vintages, as these types of wines have strong reputations in terms of quality, and have the capacity to mature well. However, other wines from all over the world are now found in wine investment portfolios, including those from the regions of Rhone, Umbria, Tuscany and California. There are strict laws put in place, which govern how fine wines are produced; this means that only a finite amount of any one vintage is ever created. This, along with the fact that the appetite for fine wine increases with every year, means that the demand for this product always outweighs the supply, and so the value of the wine increases. Currently, because wine is considered to be a ‘wasting’ asset (i.e. it will not be around permanently), investments in this area are not subject to the costs of capital gains tax. This, combined with the fact that the investor can purchase, store and sell their wine in bond, mean that returns on fine wine investments are tax free. Wine investors rarely suffer in times of economic crisis, as during these periods, speculative capital often moves over from the financial market into commodities which are more tangible, such as fine wine. This will generally compensate when the consumption (i.e. the demand) for wine drops, and thus prices will level instead of crashing. Much like with any kind of investment, it’s essential to seek out advice from experts such as Imperial Wines of London, in regards to when, what and where to purchase, as an understanding of these factors, along with cost effective and careful management of the wine portfolio, will make the difference between a mediocre or an impressive return on the invested money.
Published on Jul 23, 2012