Diversify Your Portfolio | Buy Wine!

Posted by on May 23, 2011 in Wine Nutch Blog | 20 comments

During the past fifteen years the stock market has seen more ups and downs than the Top Thrill Dragster, rolling their values through two bubbles-a-bursting and the resulting recessions. Wine, however, seems to remain consistent in performance over the same time period. In fact, against the Russell 3000 Index, wine has clearly been the winner.

The primary reason: a great wine is a good wine and only increases in value each time another bottle is opened. Secondary reason: individuals who typically buy premium wines may be impacted by recessions, but not to the same degree as the general public. In other words, "less rich" is still "rich."

If you are going to delve into the world of investment wines, here are a few tips:

(1) Learn about premium wines: This doesn't mean just drinking! You need to read. The best book I have found is The Wine Bible by Karen MacNeil. This book is literally what it claims to be regarding wine. Pick a country (uhhh...France), then a region (uhhh...Burgundy), and read! It's not just any wine that appreciates in value. Educate yourself on what matters. For the most part, sorry Francophobes, these wines will be French.

(2) Bring in some friends: If you are new to this and can't see yourself spending at least $400 for a bottle of wine (even though it may appreciate to $4000 in ten years), partner up. It is possible to find great deals. For instance, at auction the wines typically open at a "reserve" price. In many cases, 50% of appraised value. Oftentimes lots have multiple bottles. These are potential values to steal if there are few and low bidders. I have personally taken advantage of buying three bottles in a lot for the price of one at appraised. I then went on to double my money trading one bottle, enjoying another bottle in celebration of the trade, and storing the third for a rainy day. Finding a friend passionate about wine who is also willing to invest can turn this into a very fun diversification tool. By the way, I don't recommend drinking at auction!

(3) Connect with an auction house: This is the scary part, right? The commitment. When you are ready, you will have to engage with an auction house. As with many organizations, auction houses have customer service reps (although, that's not what they're called). I was lucky. I have a friend who is part owner of an auction house in Napa. Of course, I recommend contacting them: Wine Gavel. Although relatively new on the scene, they are highly experienced, headquartered in Napa, and are completely willing to teach. This differentiates them from some of the other established high-end auction houses. Since they are new there is also another advantage for now (sorry, Jorge) : fewer bidders! This increases your chances of finding a gem (Vive La Tache!)

This can work for you if you take the time to harness some knowledge. “My wine cellars have probably appreciated better than any other investment I have made personally,” said Drew Nieporent, owner of Corton, Nobu and Tribeca Grill in New York. The third restaurant holds a 2009 Grand Award from Wine Spectator magazine. “Great wines are scarce,” he said. “You can’t get them everywhere.”

Finally, from time to time you will see me post the Liv-ex 100 Fine Wine Index, which represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market. It is currently the source for benchmarking fine and rare wines.

If you have any comments, please post. If direct questions, contact me here.

Please visit the website of our new wine trading company, Vincita Trading, LLC.

So stay close to this blog, study up, and cheers!



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