Fine wine has proven to be one of the most lucrative assets in alternative investing. Investors are slowly shifting their interest towards investing in non-traditional assets.
This is because investing in alternative assets can be less volatile with high potential returns. It has consistently outperformed equity markets, especially during global events such as COVID-19 and inflation.
Historically, alternative assets have a low correlation with traditional assets, meaning that they can play a vital role in portfolio diversification and risk return improvement. If traditional assets are not performing well, then often alternative assets have performed better. Investors are slowly shifting toward alternative investments to diversify their portfolios and protect their wealth.
Specifically, the fine wine industry has proved to be resilient over the years. It is an accessible market for many, that has shown steady growth over the years.
For instance, fine wine as an alternative asset has shown better resilience in the market during COVID-19 than traditional assets, with the Liv-ex Fine Wine 100 showing an increase of 30.6% versus the S&P 500 increase of 23.7%.
Diversifying your portfolio and enhancing it with both traditional and alternative assets is key. It helps you maximise your sources of income and can help protect your wealth from risk and volatility.
This is why AssetTribe came to life. We want to bring exciting and alternative assets, such as fine wine, to the forefront of investors. We want to help like-minded investors have the power and the knowledge to diversify their portfolios.
Find out more on investing in alternative assets, such as fine wine, with this guide.
Why invest in fine wine?
The fine wine industry has shown a steady and positive performance throughout the years.
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Under the Liv-ex 100 and 1000 Indices, investors are able to view the performance the overall fine wine market compared to other tradable assets, such as commodities. Over 15 years, fine wine has proved to outperform other assets showing an impressive annual growth of 15.6%.
It has outpaced other assets by 13.6% CAGR over the past 15 years versus the S&P’s CAGR of 7.6% over the same period.
This could be due to its vast diversity in wine producers and regions, making it a highly accessible asset as well as diverse in itself. The diversity in this industry encourages a healthier market and drives overall growth.
Fine wine has been a dependable investment with considerably less risk and 8.8% less volatility, according to Liv-ex. It is also relatively liquid. This ease in selling and buying this alternative asset is what attracts and retains investors.
Fine wine is a reliable alternative investment as we can now officially measure its performance globally as well as track its past performance. It is possible to measure it compared to traditional assets and clearly see its immense positive growth throughout the years.
Investing in fine wine is an option for investors that are looking to diversify their portfolios, manage portfolio risk and offset market volatility. The AssetTribe platform can help qualifying investors diversify by reducing minimum investments and bringing lots of exciting opportunities across the different categories.
How does wine investment work?
Investing in fine wine is an intricate process as you are looking to buy investment-grade wine.
The value of an investment-grade wine will increase in approximately five years, making it a great investment opportunity. The higher the value of the wine at the time of selling, the better returns you will get back.
There are a number of factors that influence the wine’s value and its investment potential:
- Wine producer’s reputation
- Wine’s ageing potential
- Scarcity
- Wine’s year of harvest
- Opinion of wine critics
- Wine’s price appreciation over the years.
It is important that you efficiently evaluate investment-grade wine to minimise risk and maximise your future returns.
How to find wines worth investing in
Investment-grade wine is sold in two types of markets. It is sold from wholesalers to consumers, and between investors and wine collectors.
For wine investors and collectors, wine is available to purchase in auctions, wine exchanges and through brokers. It can be either stored as an investment or stored to consume later.
How much to invest
Investment limitations in this industry vary.
For instance, platforms such as Cult Wines require a minimum investment of £10,000 while Berry Bros & Rudd require a smaller lump sum, making investing in fine wine considerably more accessible to all.
It is important that you do your research or consult a wealth advisor before investing.
What returns to expect
All investments carry risk and returns cannot be guaranteed.
Investments tend to perform better with better annual returns when invested with a long-term plan in place. The fine wine industry has been growing gradually over the past 20 years, meaning that a long-term approach to investing in wine could work better for you.
Investing in wine – tips for future investors.
Investing may seem daunting as it is not a traditional asset to invest in. However, not all young investors start with well-known and expensive wines. It is also not a prerequisite that you invest in reputable wine varieties such as Romanée-Conti, Burgundy and Bordeaux.
Fine wine is an accessible asset and a diverse market for all. By paying attention to the following, you could minimise risk before investing.
Diversify your wine portfolio and invest in less known varieties.
The wine market is extremely diverse, allowing you and other investors to diversify your wine portfolios and better secure your future returns.
By diversifying your wine portfolio, you spread the risk and manage it considerably more efficiently.
Invest with a long-term approach.
The principle of investing is to purchase a valuable asset for less and sell it for more. To accomplish this, time and patience are essential. A long-term approach to investing is key to seeing positive returns.
Investors also tend to buy wine en primeur, meaning that they purchase the wine on its release and store it long-term until it matures and its value has increased.
A minimum of five to ten years is usually suggested for best results both in the taste of the wine and in value potential.
Get professional advice before investing.
Consult your wealth advisor before investing in fine wine and get expert advice on the advantages and risks. This is because direct investments, such as wine and gold, are not regulated by the Financial Conduct Authority. However, funds or collective investment schemes in these asset are regulated.
It is important that you understand the risks and regulations around alternative investments.
Invest with reputable merchants.
It’s not unheard of for people to invest with the wrong people.
Do extensive research and find reputable merchants that adhere to their Code of Practice and will help you in your wine investment journey.
Compare costs between merchants.
There are extra costs and fees with each wine merchant.
When you purchase the wine, there are storage costs that you need to consider. This cost is unavoidable if you can’t provide storage of your own in order to preserve the taste of your wine and its market value over time.
There’s also insurance as an extra cost when investing directly, which investors purchase for the protection of their investment.
How to start investing
There are two main ways of investing in wine: investing in wine as an individual and investing in a wine fund. As an individual you build your personal wine collection, buying and selling investment-grade wine either with the help of a consultant or by yourself.
Another option is to invest in a wine fund. This is regulated and is accessible to those who are able to make bigger financial investments.
AssetTribe brings you closer to fine wine funds.
AssetTribe is an investment platform that aims to engage like-minded investors with exciting alternative assets, such as fine wine. We want to bring qualifying investors in our community closer to real-world assets across multiple industries and source exciting assets which diversify your portfolio and aim to boost your returns.
Whether you choose to invest yourself or invest in a wine fund, these five steps in investing are crucial to both parties.
Step one: Research wines.
Research before investing is key. Investments carry risks that investors should be aware of.
Investors should also research the various wine varieties and wine producers before investing. It is important that you are aware of the investment you’re making as a future income cannot be guaranteed. Ensure that you’re investing in investment-grade wine.
A common rule of thumb is to have a diverse wine portfolio, just as it is recommended to have a diverse investment portfolio. Through research, you’re better able to understand different wine varieties and select the best investment for your portfolio.
Research protects you from risk and offsets market volatility.
Step two: Determine how much you will invest.
Whether you’re starting your collection yourself or investing in fine wine through an investment platform, you need to define how much you’re willing to invest. This indicator will prevent you from investing more than you can afford to lose.
As mentioned previously, some investment platforms don’t accept investment trading below a certain threshold.
Step three: Find where you’ll buy the fine wine from.
If you’re investing in wine yourself, you could buy wine from auctions, wine stock exchanges, wineries, and through a wine broker.
If you’re collaborating with investment platforms, experts will take care of researching the best varieties for you and making recommendations.
Step four: Storage.
Determining the storage of your wine is crucial. It could also create extra costs for you, which you should be aware of before purchasing the wine.
It is important that you have arranged the storage place of your wine. Not storing it properly could affect the maturity process of the wine and its future value.
Store the wine in a storage of your own or in a professional storage facility.
Step five: Selling
Start considering where you’ll sell your investment wine.
Once it’s time to sell your wine collection and make a profit, you can attend auctions and wine exchanges or sell directly to private collectors.
AssetTribe can help you invest in fine wine
Our mission is to bring our community of like-minded investors closer to real-world alternative assets.
We ensure that we source reputable and engaging alternative assets, such as fine wine. Fine wine has proven to be a steady and profitable alternative asset since 2003.
Join our Tribe and other investors, and access more opportunities to trade your assets and source alternative ones.
