DISADVANTAGES OF INVESTING IN WINE
When the market isn't in the middle of strong bull run, as it currently is, wine becomes a real stock picker's market, which generally requires a great deal of expertise, understanding and knowledge. In other words it's very easy to make some expensive mistakes unless you know what you are doing. For instance, the value of wines like Valandraud, once the darling of the market in the 90's has plummeted in the last few years.
It's well worth remembering that wine prices can go down as well as up. Even as the market is generally moving up, particular wines will certainly move down.
There are no dividend payments and there are the costs of storage and selling which have to be factored in. Both eat into profitability
Some wines may not turn out to as good as initially predicted. Once in bottle, wines are frequently re-rated. A negative re-assessment from 98 points to 94 may well result in a fall in value. This is another reason why you should only buy investment grade wine from reputable merchants or proven investment specialists.
ADVANTAGES OF INVESTING IN WINE
The underlying principles of wine investment boil down to the laws of supply and demand. On the supply side, there are relatively few investment grade labels, whose production levels remain more or less fixed. On the demand side, there are a growing number of high net worth individuals around the world seeking to own and/or drink these wines. Ergonomically, the only way to ease the pressure is for prices to go up.
Fine Wine Investment has many advantages over other forms of investments. It benefits from being stable, easily realizable, consumable and at low risk. Above all else, due to decreasing availability, there is ever increasing demand. Globally recongnised as one of the steadiest form of investment, it is generally unaffected by recession, interest rate changes and stock market fluctuations.
Fine Wine is easily stored and generally increases in quality the longer it is left cellared. As people's perception of this form of investment grows, so has its popularity and demand. People do not like to discuss their retirement plans or insurance premiums amongst friends around the dinner table, but they do like to talk about the value of their wine.
Only 1% of the world's wine production is investment grade wine. As with the oldest rule in any Economics textbook, the demand and supply sets the price. This rule works entirely to the investors' advantage. It becomes more imminent when the Fine Wine approaches its maturity, a time deemed by many as the prime spot to indulge in it. The demands of these wines are stemmed from an increasing number of collectors; mainly from London, Singapore, China, America and Russia as well as Japan and Hong Kong. As a bottle of Fine Wine ages, it is highly sought after, which drives the demand up further. In an industry where demand usually exceeds supply, fine wine never fails to attract mobs of investment savvy audience
Investment grade wine is also become more desirable and therefore more valuable over time. The wine ages and comes into its drinking window, it begins to be consumed making it even more rare, which in turn adds yet more upward pressure on prices.
Wine is less volatile than stocks and shares, making it a less risky investment. Moreover it is not highly correlated with the stock market, which makes it attractive to investors looking to diversify a portfolio. And if the market does crash, you can at least take solace in drinking up your position.
