How to Invest in Vintage Wine

The price for a single bottle of vintage wine can range from a few hundred dollars and up.

Investing in vintage or rare wine has been popular for nearly as long as wine has been produced. Compared with many other commodities, vintage wine is not as susceptible to market fluctuations and typically can survive economic instability. Learning to invest in vintage wine requires an advanced knowledge of wine and the history of various types of wine, as well as a good understanding of the vintage wine market.The amount of money necessary to get started is entirely dependent on the individual collector's ability and intention.

Investment-Grade Vintage Wine

White wines do not age as well as reds, making them generally unsuitable for investment.

Investing in vintage wine first requires an understanding of what qualifies a wine as investment grade. While several factors are considered, generally a wine must have a great reputation for quality and price, be produced from a good vintage, receive praise from critics around the world and be of a quality that will age well over an period of time. Continued upward movement in price is also another good trait to look for in investment-grade vintage wine.

Types

Sparkling wine can only be called Champagne if produced in the Champagne region of France.

While there are plenty of varieties of vintage wine available, not all are considered appropriate for investment. Generally, Bordeaux makes up the majority of the vintage wine market due to its established reputation for great vintages and ability to age well. Burgundy and Rhone offer some limited opportunities for investment but have yet to develop as a major investment market. Cuvee Champagne, made from the first 2,050 liters of grape juice produced from 4,000 kg of grapes, can offer a great investment opportunity but may require a substantial initial investment.

Initial Investment

A single bottle of 1787 "Jefferson" Chateau Lafite was once sold for $105,000 at auction.

Investing in vintage wine can require a wide range of initial capital amounts, largely dependent on the outcome desired. Investing a few hundred dollars in a single vintage Bordeaux can represent a great investment opportunity, but will only produce a return on investment (ROI) in relation to the initial cost. For casual or beginning investors, this is great place to start. In order to experience significant ROI, you must invest a a substantial amount of money. Cases, priced in the $10,000 and up range, can often experience a steady increase in value, producing a healthy ROI when sold.

Considerations

Storing wine in its country of origin may eliminate the cost of Value Added Tax.

While wine purchased for a holiday dinner party or anniversary can be stored in your home, investment-grade vintage wine requires a more controlled environment. If you have access to a climate-controlled wine cellar in your home, this might be the best place for your collection. For the vast majority of vintage wine investors, commercial storage is a better option. Commercial wine storage facilities are available in locations around the world and can offer a perfectly controlled environment as well as protection from theft. When selecting a commercial storage facility, investigate issues such as insurance or bonding, security and reputation.

Warning

The cost of commercial storage should be factored into the cost of each bottle.

Although vintage wine can offer a great investment opportunity, there are also risks. Issues such as breakage, damage to the label, cork rot, oxidation or negative-reassessment can lower or completely devalue your investment. While commercial storage can help reduce exposure to some of these problems, some vintage wines do prove to be worthless over time. Also, unlike stocks and bonds, vintage wine investments will produce no dividends--the only opportunity for profit comes at the point of sale.

References

• Decanter: Wine Investment: Part 1
• Wine Spectator: How to Buy Wine at an Auction (VIDEO)