A step by step guide to wine investment that results in maximum gains

on Jan 17, 2015
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As a form of investment, wine can yield incredible returns; however, not everyone can make money with wine. One must understand the market and accept that they’re some sort of risk involved, too. Why does fine wine have such a beguiling prospect? Well, things are rather simple – even if your investment doesn’t pay off, you still have an interesting product you can enjoy by drinking. Surprisingly, just because an investor likes a certain type, it doesn’t mean that type has any value. It’s important to switch your focus and taste preferences towards wines with a time-growth potential. Here’s a step by step guide for investors that want to get maximum returns from investing in wine.

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Have investment goals

It’s extremely important to settle on a few ground rules before starting to invest in fine wine. How much money do you want to spend? How much do you know about the industry? Can you afford a wine consultant? The choices you make will have a great effect on your investment down the road, so you have to make sensible decisions to see great returns.

Know more about investment grade wine

Investment grade wines must have the traits of a wine that ages well, but it must also be in demand. Some of the most in-demand wines are fine Bordeaux, Mouton Rothschild, and Grand Cru Burgundy, among others. These prestigious wines are also the most expensive, and general prices begin at $600 per bottle. It’s equally important to buy cases of fine wines, and not sole bottles. This way, you can prove that the product is 100% genuine and in time, you may also have exclusivity.

When you purchase wine from regions other than Bordeaux and Burgundy, it’s important to stay focused on flagship wines that come from reputable wineries with a track record. These wines have the highest chances of selling at a high price in 5, 10 years.

Understanding how wine auctions work

There are two main types of wine auctions – live auctions and online auctions. The lives ones are considered exclusive events, and they’re meant for wine aficionados, millionaire buyers and experts in the domain (most important auctions in the world are in London and Chicago); as for online auctions, these function like ebay – people start bidding, and the highest bid wins. Some top tier online wine auctions are:

  • Ackerwine.com – Acker, Merral and Condit
  • Vinofolio.com – Vinofolio
  • Klwines – K & L Wine Merchants
  • Winebid.com – Winebid

When investors co-sign their wines, auction houses are entitled to receive a specific percentage of the sale. In general, commissions range from 1% to 20%. When people are bidding at an online wine auction, you (the seller) can accept or decline bids if they’re under the appreciated mark.

Proper wine storage

This is a very important guideline you can’t skip if you want to see returns. It’s not enough to purchase good wine if you don’t have where to store it. Fine wine must be kept cool, but not too cool. Its main rival is heat; temperature shouldn’t go beyond 700 F because you’ll “cook” the wine and the resulting aroma will be flat. Ideal temperatures are somewhere between 450 and 650 F. this is not an exact number but it’s close enough. Now, if you don’t own a cellar, you can have your wine stored in a bonded warehouse. A bonded warehouse for wine storage has many advantages; apart from keeping your product safe and sound, you don’t have to pay any additional tax.

Have patience

Just like with any other type of investment, returns are available in time. You can’t purchase 10 wine cases and sell them in a few months; things are a bit complicated than that. The average period for a wine type to appreciate in value is 5 to 10 years. If your product is stored in ideal conditions, it comes from a vineyard with a proven record and you’re not in any hurry to get rid of it, you have the highest chances of witnessing incredible returns after the 10 year period has ended.

Can fine wine make you rich? Yes, it can. Because there will always be people interesting in wine, this form of investment can only increase in value; as the demand increases and the supply decreases, fine wine might eventually turn into an exclusive type of investment that yields outlandish returns.

 

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