Wine As An Investment Asset

The purpose of buying wine generally falls into two categories. We usually buy wine to consume or as a personal collection. But there are those who buy wine to serve as an investment tool, and it is reportedly gaining momentum.

Investment in wine is an alternative of other conventional assets such as jewellery, watches, paintings, cameras, vintage cars and antiques. Fine wine investment is now a thriving business that amounts to an annual estimate of 5 billion to 6 billion pounds on a global scale. Investors view this as a more stable option as demand has proven to be comparatively more consistent and resilient to recession. Profits seem to be easily realized from this asset investment and are tax-free.

The establishment of the London International Vintners Exchange (Liv-ex) has provided a convenient platform for the vintage wine trading. Today there are more than 390 merchants trading investment grade wines on Liv-ex as demand for fine wines has been growing steadily around the world. Traditionally, American and European investors were the pioneer traders. But now savvy investors from China, Russia and India have started to participate with optimism on seeing growing demand and limited supply of vintage wines.

To gain access to the fine world of vintage wine investment, one would need to source for fine wine investment specialist in the market. The specialists will recommend fine wines with the best potential returns, based on their knowledge of taxation and market demand. They will need to manage the storage of the investments and customize the investors' investment portfolios in terms of wine stock to suit their financial means.

Knowledge of the time horizon for investment is required as investment-grade wine needs to be held for a minimum of five years averagely before the liquid asset is ready for trading. The rule of trading here is based on demand and supply. Wine that is being held for longer period of storage will fetch higher premium when supply dwindles with consumption over time. Patience is required for high premium returns and success in this field of investment.

Wine investment involves buying the top one percent of investment grade wines that are produced in the Bordeaux region of France. The wine stock are then stored in bonded warehouses. Minimum investment is one crate, usually consists of 12 bottles of vintage wines around 5000 pounds. The top five wine labels from Bordeaux are Chateaux Lafite Rothschild, Margaux Medoc, La Tour Medoc, Hout-Brion and Mouton-Rothschild.

There are also potential risks in wine investment as similar to any other investment vehicle where there is no guaranteed returns. Investment in fine wine is attached to the global economy and market forces. The rate of economic growth in emerging markets like China, could help increase demand and elevate the value of fine wine, but provided such positive factor remains unchanged.