Investing in wine is a wise option since there are a lot of advantages to such an investment. Still you need to be aware of a few common pitfalls to protect yourself. We will explore the Pro’s and Con’s of investing in wine in the following article.
Pros:
i) The yield from investing in wine can be exceptional when compared to other kinds of investment products that most people traditionally invest in. Wine investments can typically yield up to 30% per year. Additionally, wine investments have consistently outperformed the stock market for about 3 decades (which honestly, is not saying a lot).
ii) Investments in wine can be good for both short term, as well as long term investments. Short-term investments can be as little as one year, and long term investments in wine span a period of about five years. Wines investments are also hedged because the supply keeps diminishing while demand keeps increasing constantly.
iii) Wine prices do not fluctuate wildly since they are backed by a non-speculative market and are therefore not as volatile as the stock market.
iv) You do not have to be an expert to invest money in wine. A good merchant will be able to advice you on the right kind of portfolio to maintain in order to see profits.
v) You can easily sell and cash in on your wine investment with ease. This amount of liquidity may not be available in other kinds of investments.
Cons:
i) You need to go with a good company that can offer you free advice on what portfolio to build. If you are misled or if you are not able to get this information, you might end up losing money.
ii) Unless the company offering wine for investment gives you free storage up to a maximum of 5 years, you should not take up the deal. The storage costs should be included in the price, or otherwise you will lose money. Think Total Cost of Investment.
iii) Most wines, apart from Bordeaux wines, can be a risky investment. But if you invest in Bordeaux wines, you can safeguard your investment, since almost 90% of the wine investments gravitate towards Bordeaux wines.
iv) You should be able to visit in person, the bonded warehouse of the company which stores the wine for you. If this is not possible, then your investment could be risky. So go for a company that gives you this facility.
v) You should be able to plan an exit strategy where you can cash in within 5 years. Nothing longer than a 5-year period is advisable.
