Wine Investment Can Be a Good Way to Make a Profit
In tight financial times, wine investment may be one of the wisest choices. Considering that in the long run, even if the price of the bottle falls, the wine itself will be long aged and therefore improved, one could assume that wine is a risk-free investment. And under certain conditions, it can be. Wine investment can be a good way to make a profit.
The wine industry is an investment market that still remains largely invulnerable from the credit crunch. The industry’s leading benchmark, the Liv-ex 100 Fine Wine Index, recorded a value of 214.04 on May 31st 2009, increased by 0.3% since April. On a year-to-date basis, the index is up by 4.5%.
Experts within the wine investment market estimate that the industry will continue to rally, unlike the housing or the stock market that have collapsed since August 2008.
One of the reasons is that there is new availability of stock in the market. Prices for imported French wine will decrease slightly by the second half of 2009. This will increase consumption and consumers will be drinking expensive wine in better prices.
Another reason that the wine market is expected to rise is because it has strong fundamentals. This is likely to cause returns up to 30% a year for some bottles. On the other hand, there is always the risk that some values of wines may decline thus causing a negative equity.
Investing in the wine market requires a basic knowledge of the market mechanisms. In general, demand exceeds supply for the top-quality stuff, which makes the wine industry a really choosy investment market. Moreover, wine portfolio is a long-term investment that offers the opportunity for long-term profits that can be collected at a horizon of five years minimum. Fine wines have an increase of 12 percent on average over the last ten years, which shows that wine investment market is a stable and confident investment.
Here are some basic investment guidelines:
- The typical investment is one case of twelve bottles. If you have $1,000, it makes more sense to buy 2 cases of $500 rather than buying 5 cases of $200. Otherwise, the annual storage charges will considerably decrease your profits.
- Buy wines solely from well established and highly regarded merchants. There have been cases that a small number of suppliers have gone bankrupt, leaving consumers incapable of receiving their money or their wine.
- Never pay an upfront commission fee when you buy wine from a wine investment company. Normally, commission fees are 25%. Also, never trust any supplier with very high or very low prices, anyone who controls his operations via a PO Box or anyone who uses cold calling tactics to induce you into wine investment.
