Why Financial Advisors are Recommending Fine-Wine
The secondary market for wine is growing rapidly. It is currently worth $5 billion and is growing quickly as wine speculators around the world are adding to their portfolio. Many investors have discovered the merits of purchasing investment-grade wines to create more diversified portfolios and increase their annual rate of return. Some wine portfolios boast long-term returns as high as 13%, which is almost 1.5 points higher than the annualized returns of the S&P 500 between 1973 and 2016.
Many major financial advisors are recommending fine wines as investments to their clients. Even companies like Morgan Stanley and RBC Wealth Management are encouraging investors to diversify with wine. Both retail and institutional investors have been adding wine to their portfolios via Vinovest, the Robinhood of wine investing.
Vinovest makes it easy for anyone to invest in wine, whether they are well versed in the subject or not. Once users sign up on their platform, Vinovest gives them a quiz that assesses their risk tolerance and then runs that data through an algorithm that suggests which wines they might be interested in investing in. At a higher level, Vinovest allows investors to hand-pick their own portfolios. Through Vinovest, users can buy/sell wine directly on the platform, and Vinovest even preserves the purchased wine for their customers so that they do not need to worry about having the proper facilities to store their wine without damaging it. If an investor would rather uncork their wine, Vinovest allows the investor to withdraw from their portfolio and sends the wine directly to their houses! Considering these benefits, it is no wonder that Vinovest is the go-to platform for many investors and investment firms.
Should I Invest in Wine?
There are many reasons to invest in wine. Wine is a stable asset, regardless of the geopolitical, cultural, and economic challenges that equity market investors are likely to face. The fact that wine has been a popular product for millennia is a testament to its stability in uncertain economic conditions.
These are just a few of the many reasons that leading financial experts are encouraging investors to invest in the world’s finest wines. Some of the other reasons that you might want to invest in wine are listed below:
Globalism is expanding the market for high-quality wines
Although wine has been a staple in many cultures for centuries, other parts of the world have only recently discovered it. Wine wasn’t very popular in Asia until a few decades ago, but many Asian consumers have since developed an affinity for it. Experts attribute the growing global wine market to a larger number of Asian buyers.
Value of the top vintages will increase as their supply drops
High-end wine investors have a unique advantage relative to those investing in antique cars, rare coins, and other collectibles. An antique car can last for years, especially if the owner rarely drives it and replaces parts that stop working. Coins can last for centuries if they are stored properly. However, a bottle of wine can be consumed over the course of a single evening. People consume wine much more quickly, which reduces the supply on the market much more rapidly.
Wine investors have a unique opportunity to purchase wines shortly after they leave the vineyard; the number of that variety of wines in circulation will drop sharply within the next couple of years, which will significantly increase the price.
Trading opportunities are not limited by the efficient market hypothesis
Most modern investors strongly believe in the efficient market hypothesis. This hypothesis states that the value of a stock, bond, derivative, or other financial security is the sum of all known information. This means that it can be very difficult to beat the market by analyzing new developments because the price has already changed to reflect news–so unless you have inside information, it can be very difficult to outperform the average money market manager.
On the other hand, wine investors have far more opportunities to beat the market. The secondary wine market is a sliver of the size of the market for stocks, bonds, foreign currencies, and other traditional financial assets. Since it is much smaller and far less efficient, knowledgeable investors can earn much higher returns.
So what can wine investors do to maximize returns? They can focus on studying weather patterns in various regions to anticipate the quality of the wine that will be grown there. They can take time to learn about different wineries in prominent wine-producing regions since their wines are more likely to be rated as “investment grade.” They can purchase wines that are produced during major events since they will likely be purchased as collectibles.
Low investment barrier compared to other inefficient markets
As stated above, you can earn higher returns with lower risk by investing in less efficient markets. However, markets for many assets are less efficient because there is a higher barrier to entry. The market for antique cars is a prime example; you might have to spend $25,000 or more to purchase an antique car. However, the great thing about the secondary wine market is that the barrier to entry is low compared to many other collectibles. That being said, you can create a wine portfolio with just a few hundred dollars.
What’s the best way to invest in wine?
More people are working with companies like Vinovest because investing in wine can be a headache, and Vinovest removes the risks associated with investing in wine yourself. There are many nuances to the market, which influence the future value of a given wine. You also need to understand enough about wine to decide whether a particular variety matches your risk tolerance and growth objectives. Storing wine can also be difficult if you don’t have the temperature and light controlled facility to preserve it properly. But at the end of the day, the reward for investing in wine can significantly outweigh the initial costs to get started investing in wine.