5 Reasons to Invest in Wine

Part of my mission as a Vinovest team member, is to help demystify the world of wine investment, and make it understandable to traditional investors like myself. In our modern era of Bitcoin, Dogecoin, Ethereum, Amazon (NASDAQ:AMZN), Shopify (NYSE:SHOP) and Zoom (NASDAQ:ZM), it is rare for investors to have the opportunity to invest in something timeless. Something that’s story was being told long before we were here and will continue long after we’re gone. It doesn’t hurt that you can also make some big money doing it!

Here are five reasons you should invest in wine.

1. The investment returns are compelling

Done properly through a portfolio advisor, wine investing can be incredibly stable. If you track the returns of various wine indices through time, they operate independently from bond and equities markets. They also carry far less volatility. Liv-Ex’s Burgundy 150 index, comprising the wines of Burgundy in France, has gained 89.6% through the last five years. At 17.92% annually, it has outpaced the S&P 500’s average annual gain of around 10%.

Our own proprietary Vinovest 100 index did 8.8% in 2020, with median annualized returns for client accounts of 17.83%. As with all investing, your return potential is predicated on your concentrations and risk tolerance. Tuscany for example saw an annual return of 16.9% in 2020.  Again, the key is to have the research of professionals.

An investor note: As a stock market guy I am well aware that these returns don’t compare to some of the incredible gains buyers were able to make in the stock market in 2020. What’s important to remember, is that isn’t the way it usually goes. We’re focused on risk managed, quality portfolios. Wine investing competes with the averages of the market through time.

2. The economics are simple

Whereas the stock market requires constant due diligence of a company's underlying financial performance through time, wine investing is primarily based around supply and demand.

A good vintage, one that not only receives high marks upon release, but also continues to develop a following and subsequent demand through time, becomes set to rise in value.

Imagine investing in stocks like Tesla (NASDAQ:TSLA) that have a stellar IPO, and that sheer aging will improve the quality of its balance sheet. Now imagine that the number of shares in the stock are going to progressively decline. It’s going to drive up the share price of the remaining shares.

That’s wine investing in a nutshell! As buyers drink away the bottles of a highly coveted vintage, the remaining bottles rise in value.

3. Technology has made it accessible to everyone

Many are not aware of the lucrative returns of this alternative asset class; primarily because it has historically carried some major barriers to entry. Most of us don’t own world class wine cellars. We are not master sommeliers, and we don’t have access to the pricing data that large auction houses and merchants do.

At Vinovest, we’re changing that. Our investing platform is aimed at giving everyone access to an alternative asset class that has historically proven itself capable of beating the S&P 500. We allocate data from all of the expensive sources of pricing and trade that professionals use, and compile it into our service. Our advisors find the deals, and buy them at discounts. We handle procurement and storage of your wines in world class warehouses. The British Royal Family even uses one of our England based locations. Best of all, it is all insured for any accidents or damage that might occur.

We have essentially taken what Robinhood, or E-Trade (NASDAQ:ETFC), or TDAmeritrade have one for stock buying, and applied the concept to fine wine investing.

4. It’s passive income

An article from Forbes points out the fact that $100 invested in the fine wine market in 1952 would be worth $420,000 in 2020. That’s an average return of 6,175% annually. The same $100 in the stock market would have been worth $100,000.

Time is your friend. Once you have acquired a wine, Vinovest recommends an investment period of at least five years. There are of course moments where certain bottles will take off, but the simple mechanics of supply and demand operate over time, as the supply of a finite commodity decreases.

Once you own it, you can sit back and let your money work for you. Who doesn’t like building wealth while they’re sleeping?

5. You actually own something

Before joining the Vinovest team, I was in the dark about the investment potential of wine. Though a much smaller market than investing in stocks, the earnings potential is awesome. Moreover, the attributes that govern the price fluctuations of fine wine are as simple and rudimentary as Economics 101.  Wine is an area within alternative assets that offers those opportunities. You’re not just buying shares of a stock that will go up and down. You’re investing in something of true craft. Something tangible… that people have devoted their lives to making.

If you buy shares of Ford (NYSE:F), and the stock goes down, are they going to give you a Mustang to say sorry? NO! If you invest in Apple (NASDAQ:AAPL) and they report bad earnings, are they sending you a Macbook? Nope. If you invest in a wine that doesn’t perform the way you want, you can drink it! Luckily for you, we work hard to ensure that doesn’t happen.

In our modern world of tech, it’s easy to forget that the best things take time. It’s easy to forget that quality investments come from quality products. At Vinovest, we’re doing something different. We’ve taken technology and used it to make something old, new again.

Cheers!