For wine lovers who have some extra cash lying around, investing in this beverage may sound like a great idea. After all, fine wines can go for thousands of dollars, especially if they are historic or from special eras in time. In fact, the most expensive wine ever sold was 114 bottles of Romanée-Conti Burgundy for an astounding $1,283,451.
With such a huge payout, it’s easy to see why becoming a wine investor is so alluring. However, it’s important to realize that there are risks, which is why it’s so important to do your research and take into account the following facts about wine investing.
1. Prepare for a Loss
A good rule of thumb when investing in wine is to never invest more than you can afford to lose. While nobody wants to anticipate the situation where they have to drink a bottle of wine because they can’t sell it, it may become a reality. Do your research, take a hard look at your finances, and then determine what you can comfortably set aside for an investment. Most experts in this industry agree that $12,400 is the amount you’ll want to spend in order to have the highest likelihood of a return. When considering a purchase, ask yourself this: do you need the money to survive? If you can spend it without missing it, then it’s definitely something you can feel more confident about handing over.
2. Look for the Best Brands
When it comes to wine, the brand means everything. In order to become familiar with the best out there, it’s essential to do some research. Never purchase a bottle just because someone tells you the brand is great; determine that on your own. Most experts agree that you should only invest in a brand that has an excellent reputation for holding its value. Some of the most notable brands include: Latour, Haut-Brion, and Chateau Lafite Rothschild, which continuously re-sell quite well.
3. Don’t Buy Blind
One of the worst things you can do is purchase a bottle of wine without paying attention to the price. This is especially true of an investment, which is something you must shop around for. One of the best ways to do this is by taking time to compare prices online. One website that is especially helpful is wine-searcher.com, which tells you the global market price for fine wines. You should also be diligent about which company you purchase from to make sure you get a bottle that’s a truly good investment.
4. Don’t Sell Right Away
You should keep your fine wine investments for at least five years before you think about selling them. The best wines to sell after this period of time are those that are produced in limited quantities. The reason for this is because the limited amount available creates a bigger demand, which increases the worth of each bottle you have. Fortunately fine wines appreciate in value the longer you have them, so even if you’re not ready after 5 years you’ll still continue building value. However, it’s important to keep in mind that prices will fluctuate, but those changes shouldn’t affect you if you’re a medium or long term investor.
5. Don’t Store at Home
In order for your fine wine to maintain its value, it needs to be properly stored. The best place to store it is in a government licensed bonded warehouse, as they offer professional storage solutions. With their help, which includes sealed cases, you’ll have peace of mind knowing you will maintain the value of your wine. To protect yourself even further, it’s recommended to purchase insurance just in case an accident were to happen. After all, this kind of bottles are worth their weight in gold (sometimes literally) and are not just regular wines that you can get from a wine delivery.
6. Be Cautious of Barrel Wines
Wines that’s still in the barrel, otherwise referred to as “en primeur”, may sound appealing to buy because you get a better deal. However, you won’t get your wine for 2-3 years after the purchase and the bottled product may not stand up to the samples you were provided with. This could mean losing money on something that was supposed to increase your net worth.
7. Research the Tax Advantages
Many wines are exempt from capital gains tax, meaning it’s an even better investment for those looking to make money. However, to determine if this is applicable to your investment, make sure to speak with an adviser.
Your Next Wine Investment
This delectable beverage may very well become an investment that pays off well into the future. However, never go into wine investment without doing proper research. By taking time to know what you’re getting into, you’ll be able to make a much more sound decision on what’s going to pay off in the long run.
Latest posts by James Rabinovich (see all)
- What it Takes to Become a Financial Advisor in the United States - September 6, 2017
- Wealthfront Robo Advisor Review and Analysis - August 8, 2017
- Investing Lesson: Should You Invest in Pre-IPO Stocks? - July 13, 2017