If you have always believed that collecting wine is a privilege that only the super wealthy get to enjoy, you might need to reconsider your views! Now, commoners can also collect wines and see them as an investment option.
Although wine used to be a luxury a few years back, it is now also seen as an alternative asset to conventional bonds and stocks. According to IWSR Magazine and Vinexpro, the US emerged as the wines’ top market in 2016 amounting to US$35 billion and is soon going to witness a growth of 25% by 2021. It is predicted that the US wine market will amount to US$45 billion by 2021. However, it is not just about the US, but China’s market is also likely to grow 30% and will reach US$23 billion from US$15.24 billion by 2021.
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That said, fine wines have appeared to be a viable investment option. According to the Swiss bank, wines have outpaced gold and other global equities. Not only this, but it is also found that wines are less volatile when compared to the gold, which makes them a completely safe and high-yielding investment option.
Although a comparatively safer alternative, investors should remain prepared for the risks before investing in these assets whose supply is highly dependent on the weather and demand as this can fluctuate their prices to a large extent.
Not to forget, wines have a low liquidity and often involve huge dealing cost. Additionally, wines are also associated with
currency risk as the best wines are often dealt in British pounds.
Wines Have Provided Best ROI in the Last 10 Years
The
Knight Frank Fine Wine Icons Index, which enlists some of the great and classic wines, has grown 9% over the last year and has provided gains of 180% over the past decade without witnessing a single losing year.
It is worth mentioning here that you cannot invest in this index as only a few of the most popular wines from Bordeaux can be dealt with here. Domaine de la Romanee-Conti, for instance, is a popular burgundy that costs between £6000 and £10,000 a bottle, but it is extremely hard to source and trade it.
In this aspect, fine wine is somewhat similar to properties which you cannot sell in a hurry.
How to Trade
The easiest way to trade wine is through a merchant account, such as one with the Wine Society, Berry Bros or Wine Owners. However, accounts with these charges can charge you a fee. Wine Owners, for instance, charges between 4 and 6.5% for buying and selling. The exact fee depends on the size of the order.
If you have wine with higher-value, auctions are a more popular way of trading them, however, they are a bit expensive. For example, Sotheby’s auction fee on fine wine starts at 20%.
In addition to this, you can also plan to trade your wine in a futures market where you can buy wine in the container which is then stored in manufacturer’s cellars before it gets bottled. This method helps you in two ways. First, since the wine is stowed in the cellars with the producer, your wine is exempted from the tax and duty. Second, the wines are sold to the buyer two or three years down the line after the vintage. This way, wine gains the value.
However, there are certain important aspects that you should focus on while buying fine wine:
Storage
Wine experts highly recommend to not to store wine at home as it makes it less appealing to the buyers. Thus, it is highly recommended to store it in a bonded warehouse and only take as much home as you would actually like to drink.
Authenticity
Store wine in a bonded warehouse to take care of its authenticity. Wines are monitored closely by
HMRC, thus you will find it hard to introduce poor quality wine into the system. Therefore, before you buy wine, it is highly recommended to find out its source. Also, have a look at its invoice before making the deal.
Modern Technologies have streamlined the Wine Industry
One of the latest trading platform,
CWEX exchange, allows you to trade fine wines in cryptocurrencies. The entire trading is taken care by two business entities: first, CWEX which is a Hong-Kong based Crypto Wine Exchange and a blockchain-based crypto marketplace for automated trading of wine, and second, Dotchain GmbH which is a Swiss-based company and ensures the contractual validity and genuineness of fine wine products.
Final Thoughts
Though wines have emerged to be a viable investment option, it is highly recommended to take proper care before buying and selling them. Make sure that you buy authentic wine, and store it properly in a bonded warehouse.