Fine wine investment is delivering stronger returns than traditional investments as inflation hits record levels, so how does wine investment work?
What are the fundamentals of wine investment?
- Fine wine is a tangible asset delivering average 24.3% growth in the last year
- Growing global demand for the finite supply
- Tax-efficient – wine is generally exempt from Capital Gains Tax
- Low-risk, stable and recession resistant
- A proven diversification tool
- Established secondary market provides price transparency and liquidity
Fine wine as an alternative asset
Most of us enjoy a glass of wine but how can this be something to invest in? The fact is we won’t be looking to the contents of our wine fridge to deliver tax-efficient investment returns. However, certain fine wines stored in the correct conditions will.
Less than one per cent of the world’s wine production has the quality, critical acclaim and sufficient demand to trade on the secondary market. The fundamental dynamic of a very limited supply made every vintage which reduces as wine improves in quality over time supports strong long term growth.
Wine investments have recorded an average uplift of 11.6% in 2022 YTD, with the top performing regions Champagne and Burgundy seeing their investment wines record increases around 50%. (Data source: Liv-ex.com, 31.07.2022).
So how do you know which wines can make your money grow and what do you do with it to optimise your returns?
How do you invest in wine?
Firstly, investing in wine does not replace your traditional investments. As an asset, wine performs differently to your stocks and shares, with its key characteristic of stable growth over the long term and relative resistance to recessionary pressures. This performance can add value and de-risk your overall portfolio performance.
Five steps to profitable wine investment:
- Be clear about your investment goals: How much are you looking to invest, how long would you like to hold your investment for, what level of return do you hope to achieve, how ‘liquid’ do you need your wine to be and if you’re a collector, is there any wine or region you want to build into a portfolio?
- Select the right wines for you: With your goals in mind, you should ideally work with a wine investment specialist like Vin-X, to identify the best investment wines in the secondary market to suit you. The market is diversified by region, vintage, and wine producer (brand), and you should look to acquire wines of excellent provenance and build a varied wine portfolio to optimise your returns.
- Store your wine to protect its future value: Investment wines are created to improve as they age and should ideally be held in bonded storage facilities where temperature and humidity conditions are perfectly managed to protect the quality of your wine. This also provides a tax benefit as wines held in bond are still considered ‘off-shore’ and no Duty or VAT payments are triggered unless removed. Your investment wine is valuable and should be insured for its replacement value.
- Stay informed to maximise gains: Fine wine prices are influenced by global political and economic events, along with factors that shape supply such as climate and disease. Changing demand for wines of different regions or brand, has seen new markets emerge, such as the Rhone recently, and average price growth of over 50% for Champagne and Burgundy investment wines in the last year. As a wine investor, you should stay up to date to enjoy the best returns. We keep you informed about the value of your investments and the market
- Time your exit to suit you: You need to monitor performance and plan to exit your wine investment at the best time to achieve your goals. As a specialist, we will keep you updated with the value of your wine, the current market trends and advise you on the optimum time to sell to enjoy the best possible tax-efficient gains.
Why every investor should invest in wine
With inflation levels forecast to exceed 15% by the end of 2022, cash savings are being eroded. Investors looking to protect wealth in one of the most complex economic periods in the last fifty years must consider diversifying with fine wine.
For more information on current wine investment performance see our latest Market Report and speak to a member of our expert team on 0203 384 2262.