Investing in good wine | MENAFN.COM
By Chitra Kadam
New Delhi, June 12 (IANSlife) The older the wine, the better! This phrase applies not only to the taste of wine, but also to its value, which increases over time.
Wine is rated on rarity, blend, label reputation, and longevity, so keep that in mind before making decisions. What started with a few million is now a $5 billion market, about 65% more than a decade ago. Investments in wine have not been affected even in extreme situations such as the Covid-19 pandemic. Due to the ability of wine investments to provide a hedge against inflation and currency depreciation, wine is the preferred alternative asset of many modern institutional investors.
* The value of wine depends on many factors. Here are a few :
Rarity: The rarer your wine, the higher its value. People want to own valuable and rare things to have status in society. Some people do it for fun.
Combination: The wine should be a good mix of acidity, alcohol, flavor and tannins. This determines how well it will age over time. If the mix is not good, age may not matter.
Reputation: The pedigree of the winemaker is also an important factor. Traditionally, people consider the Bordeaux region, Burgundy, the Rhone Valley and Tuscany in Italy to be very famous winemakers.
Longevity: It sometimes takes 10 to 25 years for the wines to reach their maximum maturity.
* Benefits of investing in wine:
Low Taxes/Fees: Investing in wine offers advantages in terms of taxes and associated fees.
Stable investment strategy: As Wine is independent of stock market fluctuations, it can be considered a stable investment.
Reasonable returns: Average returns are 10% per year, however, a good portfolio can perform well and give you returns as high as 150%.
Asset Appreciation: Value increases over time.
* Returns on investments in wine:
Annual returns of 10-15% are typical in the wine industry. However, some rare bottles can work exceptionally well, yielding amazing results of up to 150-200%. The risk is almost non-existent and the returns are mostly stable. Wine is a growing asset, and losing money on it is rare.
Wine has no correlation with the stock market, making it a safe investment. During the 2008 recession, the S&P 500 fell 38.5%, while the Liv-ex 1000 for wines fell only 0.6%. When the pandemic started in March 2020, the S&P 500 fell 25%, while the Liv-ex 1000 stock market fell only 4%.
*Steps to keep in mind when investing in wine:
Do your research – Research is important in any type of investing. As mentioned earlier, people buy wine for pleasure, so it’s important to research which wine people have bought in the last few years and which they might be interested in buying after a few years.
Figure out how much you can invest – Experts say you need a minimum of $10,000 to start investing in the right wine. There is a wide range of wines available and it is good to maintain a portfolio of different types of wine such as Burgundy wines and SuperTuscans and Barolos from the USA.
Find a sales platform – You can sell your wine at auction or to other private collectors. You can also sell your wine on wine exchanges, they may charge around 10% of the total profit.
(Chitra Kadam, Financial Engineer, Hedonova)
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