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By Shrestha Saha

28th Nov 2022

3 mins read

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You are here for the right reasons. Continue reading if you are an ADULT.

If you are not, read it but don't act on it.

What comes to your mind when you hear the term 'investing'?

Mutual funds, equities, FDs, and bonds, correct?

But did you know that a bottle of Cabernet Sauvignon wine can give you good profits too? All you need to know is where to buy it from.

Wine investment is an excellent source of portfolio diversification.  Shares go through a cycle of boom and bust due to traditional investing factors like the economy, market, inflation, etc.

Wine investing complements traditional investing as it depends on factors different from the stock market, like harvest yields, weather patterns, and consumer preferences. This makes wine a great alternate investment.

Wine sounds fancy as an alternate investment, but is it even profitable? Let's find out.

London International Vintners Exchange, also known as Liv-Ex, is a fine wine index. The Liv-ex Fine Wine 1000 has risen by 270.7% from July 2001 to July 2021. It also gave a 22% return in the same period the S&P 500 index gave a negative 5% return.

How does wine investing work?

First of all, every bottle of wine isn't worth investing. So how do you go about wine investing?  Well, here are a few factors:

Understand the wine's longevity and potential

With every type of alcohol, ageing is a critical factor. As for wine, some wines age better than the rest. The kind of grape, the amount of acid, and the tannin content can affect a wine's ability to age appropriately. It would be best to look at a producer's history of producing wines that hold up well over time.

Wines vary in terms of longevity. Investment-grade wines generally reach maturity 10 years after bottling, while others can age for far more extended periods while still enhancing in value and quality. However, some will only be drinkable for a lesser time after maturing.

Be mindful of the vintage

The year in which the grapes are harvested and the wine is produced is called the vintage year. The quality of the wine varies from year to year, depending on weather patterns and the harvest quality. To be a wine investor, you must be mindful of the vintages that yield the best wine production.

Rarity and Price History

The scarcity of a particular wine bottle demonstrates the value of the vintage. For example, the most sought-after wine Burgundy is the product of the Domaine de la Romanée-Conti (DRC) vineyard. Since the vineyard is of small size, it produces only 450 cases a year. So when there is a ranking based on aggregate sales, DRC tops the list because of its price per bottle.

All these factors seem pretty reasonable, right? If that's the case, why don't we hear about wine investment as much as traditional investment products? The catch is that:

  1. The initial cost may go up to INR 1 crore
  2. Shipping cost & storage cost is high as it is a tangible asset
  3. Insurance
  4. It has a longer holding period. It may be around 7 to 10 years before wine investments yield a desirable return.
  5. It's not an investment option in India

So let's go to the USA then?

Because companies like Vinovest, Vint, and Cult Wine Investment are USA-based companies making wine investing as easy as drinking it. There has also been a new concept of a membership-based wine community in the US.

If you are an oenophile, you only need INR 8 lakh rupees to begin your wine investment journey. ( Oenophiles are people who have a passion for wine. They are most likely to invest in wine and gain from its appreciating value)

Do you want to know about more such alternate investment options? Let us know in the comments.

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