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Wine, when consumed in moderation is good for health. It is certainly a great lifestyle drink. Wine can also be a good investment. With a legal limit of investing up to US $ 25000 per individual, it is quite feasible for HNW wine connoisseurs to dabble in this form of investment. Following the superb 2005 vintages of Bordeaux and Burgundy, there has been a global increase of interest in wine futures and funds.
The underlying principles of wine investment boil down to the law of supply and demand . On the supply side, there are relatively few (perhaps only about 75 in total) investment grade labels, whose production levels remain more or less fixed. On the demand side, there are a growing number of high net worth individuals around the world seeking to own and/or drink these wines. Ergo, the only way to ease the pressure is for prices to go up.
Investment grade wine is also an improving asset. As fine wines mature they become more desirable and therefore more valuable. At the same time, as the wine ages and comes into its drinking window, it begins to be consumed making it even more rare, which in turn adds yet more upward pressure on prices.
Fine wine has seen some astonishing returns, particularly in the last two years - after a period of several years in which prices generally didn't move very much. Since the start of 2006, The Liv-ex 100 index rose +43.2% to November outperforming other asset classes such as oil, copper and gold, the FTSE and Dow Jones, though not the SENSEX, if you ignore the recent pre-budget market crash.
However, as in any other business there are several drawbacks and negatives that need to be understood before plunging into this otherwise delicious investment-after all, if the prices do not go up, you can always drink up your investment!
Decanter has come out with an extremely useful and comprehensive Guide to Investing wines. Not only does it tell you about the roadblocks, it also tells you what wines to pick, gives you a lot of easy to understand data, which regions, producers and vintages to consider. It tells you the Dos and the Don'ts, with several handy tips.
You can also find out where to buy and sell, who to contact, how much to invest and a list of useful websites. Educational bonanza even if you are not inclined to invest. And it costs you nothing.
Check out at http://www.decanter.com |
