Wine Investment FAQ

posted by Karen Orlandi on June 17, 2009 in Investing in wine

Here are brief answers to questions new wine investors want to know. For more detail on the wine investment process, advantages and trends, please read Intro To Wine Investment.

Why is fine wine a good investment?

Fine wine value increases over time because it matures and improves with age. There are also favorable supply and demand scenarios due to the limited amount produced each year, the continual supply decline from consumption, and an increasing global demand from US wine enthusiasts and Asian markets. Even in times of macro-economic downturn, wine tends to remain more robust than many other investments. And wine that doesn't live up to your investment expectations can be enjoyed personally.

Do I need to know a lot about fine wine to invest wisely?

Intimate knowledge of fine wine is not required. Thanks to professional wine critics you don't even need to know what the top investment wines taste like. However, we strongly recommend doing your own research (see Suggested Reading & Resources)and consulting a reputable fine wine retailer before making your investment. It is important that you understand which wines will have the highest returns, current market trends and how you will sell your wine when the time comes.

What are the risks and disadvantages with wine investment?

It is an investment market like any other, so be aware that prices fluctuate up and down.
Unlike the stock market, wine investment is not regulated by a governing body such as the SEC, so there are no significant consequences for wine retailers who sell non-authentic or poor provenance bottles. Buy from reputable, established merchants to avoid these risks.
The costs of storage and selling will eat into your profit margins, so do the math on your investment before purchasing.
There are no dividend payments on wine investments, and while short term gains have been possible over the past two years, wine investments should be viewed as a mid to long-term holding with at least five to ten years to realize decent returns.
Not all wine is investment grade quality, so be sure to buy the right wines at the lowest possible prices.

What wines should I invest in?

Speak to a Certified Financial Advisor for investment advice. You should also do your own research (see Suggested Reading & Resources). And feel free to speak directly with the Aabalat Investment Team, as they can provide information to help you make your decision. As a rule of thumb, the top wines of Bordeaux and Burgundy command the best returns - less than 1% of all the wines worldwide are investment grade and Bordeaux makes up 80% of these wines. The global secondary market has limited demand, so Bordeaux is realistically the safest strategy. The Aabalat Investment Team has assembled a list of common investment-grade wines.

What is `En Primeur' and what does it have to do with investment?

En Primeur, also known as wine futures, is the French name for buying wines before they are physically released to the market. Buying wine futures allows you, the investor, to buy wines at a discounted price in exchange for assuming a slight risk of not knowing the wine critics' final evaluations. Read Futures on the Aabalat website for more details on the process.

What are some good tips you recommend to new wine investors?

Consider buying large format bottles. While a case of 750ml bottles may be easiest to resell, as it can be sold as individual bottles if necessary, larger format bottles age more gracefully. We typically caution our clients not to invest in bottles larger than 5-6 liters due to the selling challenges.
Know the wine critics and their assessments of the Blue Chip wines, as their influence on consumer demand and, hence, wine value is unparalleled. Robert Parker is particularly important, but also read what Jancis Robinson has to say.
For more tips like these on wine investment, read our article on the Top 10 Tips For Wine Investments.

Can I call Aabalat for additional information and advice?

Aabalat's Investment Team is happy to answer any questions you may have regarding wine investment. (Note that Aabalat is not a Certified Financial Advisor and, therefore, has a strict policy on wine investment advice.) Please contact us at (707) 781-0619 or ask@aabalat.com.