Investing in Wine

Investing in Wine

Any purist will tell you that wine is for drinking, not investing.

Even so, prices for the Bordeaux First Growths (Lafite, Mouton, Latour, Margaux and Haut-Brion) have consistently outperformed every stock market index on the planet over the past several decades. It’s almost inevitable for them to appreciate in price because the supply is finite, while the demand is constantly increasing.

Not every wine is collectible, of course. Other than the First Growths, there are a handful of other estates worth buying for investment: a few other Bordeaux (Petrus, Lafleur, Le Pin), a Burgundy or two (Romanee-Conti and Coche-Dury), some California cult Cabernets (Harlan, Grace, Screaming Eagle) and the odd Italian property (Sassicaia). These wines typically sell for at least $5,000 per case on release, and can easily exceed $10,000.

If you’re buying for investment, there a few rules. Keep the wine in perfect storage conditions (55 degrees Fahrenheit, 60% humidity, and complete absence of light, sound and vibration).They should be left in their original wooden boxes and not moved. Buy only the good vintages, which either requires you to do research or hire a consultant. Above all, avoid the temptation to open a bottle to “see how it’s doing” (the allure of the 11-bottle case has yet to catch on in the auction world).

For those who don’t want to do it themselves, there are professionally managed investment groups that operate as wine mutual funds. Two of the best known in the U.S. are the Elevation Wine Fund and The Wine Trust. Do your homework before investing in one of these funds, to make certain that the venture is solid. Even if you’re convinced that a wine mutual fund is legitimate, there are drawbacks in the form of hefty fees (generally 2% of assets under management and 20% of the profits, in addition to early redemption charges) and high minimum requirements (Elevation Wine Fund requires a minimum investment of $250,000).

If you have access to pristine storage conditions and go it alone, start by buying a case or two as futures, and track their prices through the auction reports. If you guess wrong, don’t despair—you can always drink it.

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