Investing in Wine: A Beginner’s Guide

It is often said that one should “invest in what you know.” For wine enthusiasts, investing in wine offers a unique opportunity to profit from their passion. While wine investment is not new, it has gained momentum in recent years due to the push for more Americans to invest. The stock market saw a significant downturn after the economic crisis of 2008, prompting many investors to look for alternative investment options.

If you are a wine lover looking to diversify your investment portfolio with a commodity investment, investing in wine may be an excellent option for you. This beginner’s guide to investing in wine will help you determine whether it’s a solid prospect for your next addition to your portfolio.

1. Start with sufficient savings

Unlike buying a slightly-expensive bottle of wine and waiting for it to grow in value, investing in wine requires a more significant capital commitment. The amount you plan to invest largely depends on your investment goals, whether you are investing for the love of wine or potential returns.

If you prefer to start by collecting wines you enjoy, Investopedia suggests treating it like a baseball card or stamp collection, picking up wines that interest you as you go. While the payout may not be as significant with this strategy, you can still end up with some fantastic wines to drink if they don’t sell.

2. Be prepared to wait

Investing in wine requires patience. You need to research vintages and wine producers that have done well in the past and are likely to do well in the future. For example, recent vintages of Bordeaux wine have not been great for investment, but this year is expected to be an excellent year to invest in Bordeaux based on the Rule of Fives.

Unlike some stock investments, wine takes time to increase in value. While this could be a downside for some investors, it is an advantage for those getting started early with the gift of time on their side. MarketWatch suggests that investments in wine can take 10-20 years to yield a return. If you want to diversify your investments to supplement your retirement funds, this waiting period may not be an issue.

3. Look into professional storage options

Storing wine intended for investment at home is very risky. For wine to achieve its full potential, it must be stored in a cool, dark area that doesn’t see much light, away from excessive humidity and shaking. Experts recommend professional storage to achieve higher perceived value upon selling. Online guides can help you find professional storage services in your area.

If you choose to store your wines at home, Wine Spectator offers a guide to help you out.

4. Purchase at least three bottles to get going

Wine Folly recommends purchasing at least three bottles that add up to at least $8,000 in value to get started seriously. This is because of the high cost of storing, insuring, and ultimately selling your wine. Investing a significant amount upfront makes the return worth the hassle.

However, suppose you prefer to take a more modest approach to investing in wine and treat your collection as a passion project. In that case, you’ll more likely want to buy bottles at your discretion.

5. Understand market risks

Investing in wine comes with a certain degree of risk, as with all investments. The volatility of the wine market makes it a more uncertain commodity investment. Diversification in your investment portfolio is vital, and you cannot rely on one form of investment alone, whether it be wine, stocks, or your 401(k).

Research the wine investment market’s past and present state to get a better idea of where your potential risks and benefits lie.

Conclusion

Investing in wine can be an enjoyable and profitable way to supplement your investment portfolio. While it may take time to yield returns, consistent patience and attention to the wine market may be rewarding in the long run. To begin investing in wine, start by researching your wine preferences, the best wines for investment, and professional storage options. Seek professional advice to get started on the right foot, and you may turn your love for wine into a profitable investment.