TIME TO MA­TURE

In­vest­ing in fine wine

Business Traveller (India) - - CONTENTS -

C on­sid­er­ing the price in­creases of cer­tain wines over the past 20 years, surely this in­vest­ment is a taste worth ac­quir­ing? As back­ground, wine mer­chant Jus­terini and Brooks quotes the fine wine mar­ket as hav­ing aver­age growth of 13-15 per cent cu­mu­la­tively per an­num over the past 20 years, although re­cently the mar­ket has been flat or even fallen slightly – so buyer beware.

AN ILLIQUID LIQ­UID AS­SET

There are a few things to bear in mind. First, although this is in one sense a liq­uid as­set, in oth­ers it is illiquid – sell­ing your wine quickly at a good price may not be easy, and you may make a loss if you need to re­alise your in­vest­ment at short no­tice.

WHERE TO STORE IT?

Un­like buy­ing fine art, which you can dis­play at home un­til you de­cide to sell it, the chances are your wine will be held in a ware­house. This makes it like other as­sets in your port­fo­lio – an in­vis­i­ble in­vest­ment. In­vis­i­ble, that is, un­less you de­cide to store it at home. Won­der­ful for boast­ing to your friends, but you should re­ally only do it if you are plan­ning on drink­ing the wine. A form of ap­pre­ci­a­tion, but not a cap­i­tal one.

Why? Well, wine ware­houses are not only se­cure but they also re­as­sure po­ten­tial buy­ers. When it comes to sell­ing your wine, there is no doubt that it has been kept in the proper con­di­tions, and it helps with any ques­tions about its prove­nance.

If you do want to keep the wine at home, rea­son­ing that you might drink some, make sure you in­sure it fully for fire, flood and theft.

WHERE TO BUY?

Deal with es­tab­lished, rep­utable mer­chants – whether fa­mous names such as Berry Bros and Rudd, Jus­terini and Brooks, or mem­bers’ clubs such as The Wine So­ci­ety – and make sure you com­pare prices, although it’s un­likely these will be sig­nif­i­cantly dif­fer­ent be­tween well-known sellers.

DU­RA­TION

Bear in mind that buy­ing wine is go­ing to be a medium-du­ra­tion in­vest­ment – a min­i­mum of five years or longer – and that the price may well go down as well as up. Many of the price rises of re­cent years were sup­pos­edly driven by new mar­kets such as the BRIC coun­tries be­com­ing in­ter­ested in fa­mous wine pro­duc­ers. Fash­ions change, how­ever, as does po­lit­i­cal pol­icy to­wards such“lux­ury”items.

OTHER COSTS

Fac­tor in the amount you would need to in­vest to see sig­nif­i­cant re­turns, plus as­so­ci­ated costs such as ware­house fees. It’s worth­while ei­ther tak­ing ex­pert ad­vice, or be­com­ing in­ter­ested in the sub­ject – if you fol­low only well-known names you are less likely to see large in­creases in value. Dis­cov­er­ing an un­der­ap­pre­ci­ated pro­ducer with po­ten­tial is a bet­ter way of see­ing a good re­turn. Such in­vest­ments will carry more risk, how­ever, so try to build a bal­anced port­fo­lio.

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