Fine wine- Invest or drink your Liquid Assets

Investing in wine is no child’s play, it is serious business and it takes time and patience. The question is, with the drop in fine wine prizes from a year ago, is it worthwhile to stay in the game or not?

“I think there’s plenty of air left in this bubble. There’s more of this drop to come,” economist and author Robin Goldstein said on the sidelines of the American Association of Wine Economists’ (AAWE) annual conference at Princeton University last week.

Some investors are hoping alternative assets like fine wines will net them better returns than those found in the stock and bond markets these days. Studies show that few wines will indeed outperform the S&P 500 over the long term, but the asset class also has great volatility.

Experts and academic studies recommend investors approach fine wine as they would gold, though wine is much harder to buy and sell. They suggest it make up no more than 5 percent or 10 percent of a portfolio.

There are at least two other requirements to consider: the minimum investment should be at least three cases worth (roughly $30,000 for an investment grade Bordeaux) if taking possession of the wines and a very long-term time horizon.

Minimum investments at wine funds – financial companies that act as asset managers and mutual funds that buy cases without any intention of drinking them – range from a low of 10,000 pounds ($15,525) to 100,000 euros ($126,400).

Prices for fine wines sky-rocketed during 2009 and 2010, but seem to have peaked about a year ago, according to the Liv-ex 100, an industry benchmark, or composite price index.

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Filed under Investment Wine, Wine

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