What Kind Of Wine Investor Am I?
Often I come across a range of investors who have different aspirations and expectations for wine investment. The questions we should ask ourselves are; What am I looking for from wine investments? Can wine investment meet my goals and plans for the future? We have to manage our expectations on what wine investment can or can not do for us. I think we all agree that wine is not a get rich quick scheme. Neither will it put you into retirement early. Yet neither does it expose risks like the stock market and you can always rely on your wine to be there through the hard times. So we have established that wine investment is reliable. Yes, we have seen boom years when China decided to buy anything that contained the word Rothschild or Bordeaux, then China became wise or maybe they grew tired of the west making jokes about them drinking Lafite with Coca cola. In addition, Beijing clamped down on gift giving and corruption and the wine river stopped flowing as affluently as it had been. Then the amazing returns came to a grinding halt and here we are dusting ourselves off a three year downturn with our minds on whether we should keep or sell the wines in our portfolio which are not performing, questions come to mind like “who said they were the best wines in the world needed shooting….”
The Bordeaux market has certainly got a few challenging years ahead of it, most importantly the Chateau need to get their pricing right to attract the market again. They need to rebuild the confidence in a global market while still maintaining prestige and class yet lower their prices enough to win back the hearts of the new wine collectors and wine investors who came to know about wine in the recent years and then left in a flash. For those of you that are still here, well to put it simply – the game has changed. We can not predict whether the type of aggressive growth will be seen again in the fine wine market but we can address what is happening in the present. We have had a fairly stable market for the past 12 months, although no exciting movements. Wine has been a stable and manageable asset while currencies, commodities and other investments have been on a roller coaster ride, plagued with fears of another economical crisis looming. There is also the possibility that the global markets will experience another crash and perhaps investors will run for cover to the fine wine market just as they did after the 2008 crisis and the fine wine market bounced back in full fashion.
It may look like the high returns in fine wine are in hiding for now, what we can see is a market that is going back to its previous pattern of 10 years ago. A regular stable investment with single digit returns per annum and the odd chance of a double digit return. With less than 1% interest from savings in the banks in many countries in Europe and the Americas and 3% in some parts of Asia, as long as fine wine investment beats inflation and bank interest then it has to be better than leaving it in the bank because our money will be worth less in 10 years from now just keeping it in a savings account.
So how do we consider our wine investment decisions for the future? This advice may just help you in the long run. Invest into wine, whenever you have spare cash to put away for the future. Look at it as your nest egg. Know your limits, but try to buy with some regularity, one case of wine every five years is not going to build you a nest egg for the future so try to make a regular but periodic investment. Think of it as your long term cash savings plan. Whether it be three cases of wine per year or 50 cases, it all depends on your financial situation at the time. But regular and steady investing is the key to a successful wine portfolio. Think of your wine portfolio as your end goal, or something that will be with you forever, that can partially be passed on to your children as part of your legacy (Don’t forget to spend some during your retirement to reap the rewards). There is no harm in drinking a decent case of wine every year if you like to celebrate, that’s 1 bottle per month. Even the health authorities agree wine in moderation is good for the heart!
Perhaps you have young children and worry what the cost of university or buying a car will be in ten or fifteen years. A few cases of wine today might just pay off that college bill that’s on your mind right now. Perhaps you are concerned whether you will have enough cash to last you through retirement. Being able to sell off one case at a time from your portfolio is the beauty of buying wine, instead of having to sell off all your portfolio at once. What you should not do is sell your whole portfolio when you need cash because then you have to start all over again. Always have enough cash flow to sustain you without putting your wine portfolio under pressure.
Whatever your plans are, it is now a time to reflect on wine and see it for what it really is, a bottle of wine that should be consumed for enjoyment and pleasure, to celebrate the good times. If it can be used as a vehicle to save money and beat inflation and the poor interest which banks pay us then why not save up with wine instead of cash?
if you have 100,000 dollars in liquid assets, there’s no reason why you should not have a wine portfolio of at least 20-30,000 dollars. Personally I have more but then again I am a great believer in wine investment and its long term abilities to grow at a higher rate than inflation.
So the lesson we learn here is patience, don’t buy wine if you plan to sell it within the next 2-3 years. Buy it when you have spare money to invest, put it away and forget about it. If the wine is doing better than expected you can be sure someone will be calling you to let you know the good news.