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Investing in Wine Vs. Investing in Stocks – Which is Safer?

Screen showing the stock market figures

If you’re looking for viable investment opportunities then you’ve likely considered a range of potential investments, including stocks and wine. But of these two drastically different investment arenas, which is the safer option during the current economic climate?

In this article, discover the pros and cons of investing in wine and investing in stocks to help you make a more informed decision about which investment direction is best suited to you.

The pros of investing in wine

 

A low-risk investment

Fine wine is a physical asset, so it represents a very low-risk investment. When you invest in the market, your wines are stored in optimal conditions within a secure bonded warehouse.

Wine is a physical, tangible asset

Wine, unlike stocks, is a tangible asset created to be drunk and enjoyed. This gives it intrinsic value as a medium to long-term investment.

A relatively resilient marketplace  

According to S&P Global, wine is one of the few luxury assets to have withstood the harsh impact on assets triggered by the coronavirus pandemic, proving the market relatively resilient. Indeed, wine is widely considered to be a ‘safe haven asset’.

The cons of investing in wine

 

Portfolio valuation can be tricky

Traders tend to purchase and sell wine at a less frequent rate than stocks are purchased and sold, and there is no standardised international market. These factors can make it challenging for wine investors to get an accurate idea of the value behind the wines in their portfolio.

Selecting well-known wines could be disadvantageous

Many wine investors tend to choose mainstream wines from well-known wine regions such as California, Burgundy, or Bordeaux. Owing to their ubiquity, these wines can have a reduced chance of transitioning to rare wine status.

Selling wine can take a while

It can take wine investors some time to sell a bottle of wine in their portfolio, particularly when trying to navigate the marketplace without expert support. This can make it more difficult to access funds quickly should the need arise.

The pros of investing in stocks

 

The potential for large cash gains

Though the prices of individual stocks rise and fall daily, the potential to grow your money over time can be significant. Investing in stable companies that have the ability and intention to grow can often result in profit for investors.

Quick purchases and sales

Thanks to their liquidity, stocks can usually be bought and sold fairly quickly, and often at a fair price.

Diversification

The stock market gives investors the ability to build a diverse stock portfolio across a wide variety of different industries and sectors. This diversity can help to reduce the overall risk of stock investment.

The cons of investing in stocks

 

An erratic, volatile marketplace

Unlike the fine wine market, the stock market is a high-risk, erratic and volatile investment arena. Although stocks can be highly lucrative when invested in tactically and sensibly, the rapid, widespread price fluctuations can make it difficult to achieve the desirable returns on your investments.

Limited company information

It’s important to remember that when you invest in stocks you are investing in a public company. However, investors may not be able to access all relevant information about the company, which can make it more difficult to make good investment decisions.

Capital Gains Tax

If you make a profit on shares you sell, then you will likely have to pay Capital Gains Tax, depending on your total gains for the tax year.

However, it is worth noting that you do not have to pay Capital Gains Tax when you sell fine wine because the HMRC classes it as a ‘wasting asset’.

Wine Vs. stocks – which is the safer investment?

While the stock market represents a high-risk, high reward investment arena, investing in wine tends to offer more security – which is an important consideration if you want to create a sustainable investment portfolio.

Fine wine has a long, proven history of robust returns on investment. According to the world’s largest online wine stock exchange, Liv-ex, fine wine has delivered 13.6% annualized returns over the last 15 years – outperforming most stock markets. One need only review the Liv-ex fine wine indices to see how modest but consistent annual growth adds up over time.

So, in the case of wine vs. stocks, it is our opinion that wine is a much safer investment.

Talk to our wine investment experts

We hope you found this article helpful. If you’d like more information or advice about investing in wine, simply schedule a free 30-minute consultation with one of our wine investment experts.

Schedule your free consultation

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Invest in Champagne

Worker riddling bottles of Champagne

Considering investing in Champagne?

It’s not necessarily the most costly, nor the rarest of fine wine. However, Champagne is supremely consistent, making it arguably one of the strongest and most appealing sectors of the fine wine market.

Its steadfast presence can be attributed to its brand strength, liquidity and an aura of exclusivity it maintains despite being well-known in the main. 200-plus years of expert marketing by the best producers is what arguably makes Champagne the most broadly understood luxury good in the world.

As with all fine wine, as Champagne ages, its quality improves. As it is consumed, its supply decreases. This virtuous circle drives prices over time. This luxurious bubbly tends to be released later than other investable wines and as consumption begins in earnest immediately, we can see the impact of this cycle faster.

Top Champagne Brands to look out for

For those considering investing in Champagne, the most important brands to keep in mind are Dom Pérignon, Cristal, Krug, Taittinger and Salon. Volumes produced vary considerably from producer to producer. Dom Pérignon is widely believed to make around 4,000,000 bottles a year across all their wines. In contrast, in 2020 Salon released just 8,000 bottles of their 2008.

The Best Champagne Vintages

The strongest vintages include 1996, 2002 and 2008. Unlike in Bordeaux or Burgundy, producers tend not to release vintage wines every year, emphasising the exclusivity. This means there are vanishingly few ‘bad’ Champagne vintages. Although of course, some are superior to others, it is no more necessary to focus on only exceptional vintages in Champagne than it is in other regions.

Over the past five years Krug’s value is up 75% and Dom Pérignon up by 65%. These numbers demonstrate that Champagne is a smart addition to any diversified investment portfolio and should no longer be considered just a celebratory indulgence.

Want to find out more about investing in Champagne? Read our in-depth report here.

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Is Buying Bordeaux En Primeur still a Good Investment?

Barrel room at Chateau Lynch-Bages

Bordeaux – a treasured destination for wine lovers the world over and a renowned benchmark of the fine wine market. But are Bordeaux En Primeur wines still considered a good investment?

Whether you’re a seasoned connoisseur or a budding wine investor, this article will help you decide whether investing in Bordeaux En Primeur wines is a worthy addition to your portfolio.

How buying ‘En Primeur’ wine works

En Primeur, also called ‘wine futures’, is a method of purchasing newly produced wine early on before it’s even been bottled and released onto the market. En Primeur wines are usually shipped to the buyer between 18 months and three years after being bottled.

En Primeur wines are bought ‘In Bond’ (i.e., exclusive of Duty and VAT). They are often cheaper than the future price of those wines when they become available to the open market (10%-30% cheaper, on average) because they’re being bought a good two years before the wine has been bottled, meaning they have only been reviewed and scored by a few critics.

The attraction of Bordeaux En Primeur

Buying En Primeur wine is a custom that dates back hundreds of years exclusively to the world-renowned wine region of Bordeaux, France. Indeed, it is a concept that is still highly regarded today.

It’s no secret that the Bordeaux region produces some of the world’s most prized wines. In fact, Bordeaux has been a staple in the cellars of seasoned wine collectors for centuries.

Sought-after due to their ageing potential – among other factors – buying Bordeaux En Primeur can often be the best way to secure particularly good vintages with limited availability and the strong potential to appreciate over time.

Other benefits of investing in Bordeaux En Primeur wines include:

  • You may be able to request a specific format for the wine, be it halves, magnums, or larger bottles.
  • When you buy En Primeur wine, you’re guaranteed provenance, given that you’re buying directly from the winery.
  • Some Bordeaux wines are simply impossible to obtain if one does not purchase them at such an early stage.

What are the risks involved with buying Bordeaux wine En Primeur?

As with any endeavour to obtain assets, investing in Bordeaux wines En Primeur is not without its risks.

First and foremost, there is no guarantee that any wines you buy En Primeur – be it the latest Bordeaux vintage or otherwise – will appreciate over time. There is, however, always the potential for your En Primeur-purchased wine to lose value over time.

What’s more, some critics of the En Primeur system say that selling wines in their youth doesn’t accommodate a proper review and rating of the vintage in question.

Further, it has been suggested that the Bordeaux negociant system is a ‘delicate’ one, as it can tend to reward buyers with a well-established purchase history, which can make the process difficult for new buyers.

Is Bordeaux En Primeur still a worthy investment?

To answer that question, let’s take a look at the investment potential of the Bordeaux 2020 vintage.

According to the Bordeaux En Primeur 2020 Report, the 2020 vintage was of excellent quality and yielded many outstanding wines. Here are some additional highlights from that report:

  • Production is down slightly in comparison to the 10-year average. This is largely due to hot weather affecting the grapes.
  • Despite disruptive factors such as the coronavirus pandemic, it is a well-priced vintage overall, though less consistent than the previous vintage.

So, is Bordeaux En Primeur still a worthy investment? Here’s what Alex Westgarth, CEO of WineCap, thinks:

‘When it comes to buying Bordeaux wine En Primeur, it all depends on the vintage. Anyone considering it should be aware of the balance between quality and price in a vintage.’

In addition to those wise words, it’s also important to keep in mind that it’s still quite early to be drawing such conclusions about the Bordeaux 2020 vintage.

Talk to our wine investment experts

We can build you a bespoke wine investment portfolio based on your established goals and budget.

For reliable, expert wine investment advice, simply schedule a FREE 30-minute consultation with one of our wine investment specialists.

Schedule your free consultation.

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Our Top List of Tuscan Wines for Investment

A Tuscan vineyard

Italian wine is increasingly becoming hot property when it comes to wine investment. Last year was one of the category’s strongest when it came to trades, with an increase of 7%. Tuscany also performed remarkably well and, because of this, we have put together a list of Tuscan wines that are highly respected, built to age for years and that are leading the charge when it comes to investment grade wine.

The classic ‘Super Tuscans’ – including producers such as Solaia, Ornellaia and Tignanello (all having increased in trades in 2020 by 15%, 10% and 9% respectively) – began making incredible wines in the 1960s and 70s. These producers created standout wines using Bordeaux grape varieties and paved the way for others who are now gaining more and more recognition using other grape varieties, including Sangiovese.

Tua Rita is widely regarded as the producer who spearheaded the second wave of Super Tuscans, with its flagship wine Redigaffi. Like some of the greatest things in life, Redigaffi was created entirely by accident. In 1984, Rita Tua and her husband Virgilio moved to the quiet Etruscan coast to retire and cultivate wines for fun. Years later, and with 30 hectares of Merlot under vine, Redigaffi is now considered one of Tuscany’s finest wines that commands respect. This wine continues to gain momentum and we believe it would make an excellent investment option for those wanting to diversify their portfolio.

Second on our list of Tuscan wines is the top-flight Chianti producer Fontodi. Keeping a steady hand on the tiller at the Fontodi estate are Marco and Giovanni Manetti who have been making its predominantly Sangiovese-based wines since 1979. Their vision, expertise and commitment to quality continue to reap rewards: Fontodi’s Flaccionella della Pieve 2017 was one of last year’s top ten most-traded Tuscan wines & in the top 15 most-traded Italian wines. It represents a great diversification into a wine investment category that’s accelerated in the past 12 months.

Biondi Santi is one of the old, traditional Tuscan wine estates whose pioneering work propagating the Biondi Santi Brunello di Montalcino clone of Sangiovese cemented it as one of the region’s legendary producers. As perhaps the greatest expression of Brunello di Montalcino, this 100% Sangiovese wine aged for at least 36 months in oak is built to last for decades, if not longer. With the Riserva 2012 having all three ingredients that we would expect to appreciate: a historic brand, immense ageing potential and one of their highest ever scores – 97 points – it offers excellent value compared to top tier wines from other regions.

If you want to find out more about investing in Italian wines – and the growing Tuscan category in particular – schedule a free consultation with one of our investment experts.

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Asian Buyers make up 65% of the World’s Total Drinks Buyers

Asian lady selecting a bottle of wine from her cellar

Asian buyers now make up 65% of the total wine and spirits buyers in the world. That’s according to Sotheby’s 2020 Wine Market Report. Asia’s demand for the world’s finest wines looks set to grow too, as 2020 was the second highest percentage on record for Asian buyers, after 68% in 2019.

There are multiple factors that can be attributed to Asia’s growing market share of the total wine and spirits market. The Coronavirus pandemic had a direct impact on drinking habits last year. Unable to visit restaurants and bars, China’s wealthy citizens began opening bottles of some of the finest wines from their cellars at home.

An international travel ban and lockdowns across China also meant that those who usually would have travelled abroad on holiday, opted instead to spend their money on buying top wines such as Domaine de la Romanée-Conti: a producer that represented 20% of all wine sales at Sotheby’s last year. However, while Bordeaux and Burgundy producers still make up the top ten names in Sotheby’s annual producer rankings, Asian buyers are looking further afield to regions such as Napa, in order to discover new wines such as Harlan Estate, Sine Qua Non and Colgin Cellars.

The future for wine imports into Asia, particularly into China, looks very promising. 2.25m nine-litre cases were imported into China in 2006 compared with a colossal 50.5m cases in 2019. Although there was a slight drop in the number of cases imported in the past two years, the trend for increased wine consumption looks set to continue. This is due to a combination of wine enthusiasts having opened bottles from their cellars during lockdown, as well as the disruption caused to supply chains to mainland China by the Hong Kong riots having ended.

As more and more Chinese cities open up – such as Shanghai – on-trade sales of fine wine are beginning to blossom, as consumers celebrate the easing of lockdown restrictions. With such strong figures from Sotheby’s recent report, all eyes remain firmly fixed on Asia with big expectations for this wine market that shows huge potential for growth.

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Invest in Wine with Confidence now that we have a Brexit Deal

Old bottles of wine on display

Investing in wine is more straightforward now we have a deal

Ever since the UK voted to leave the European Union in 2016, trade talks and negotiations between the two sides had been full of uncertainty, posturing and brinkmanship which at times made it feel like a deal was unobtainable. So, the news that a trade deal – now ratified by the UK Parliament – had been struck on Christmas Eve in 2020 was met with welcome relief across all industry sectors on both sides of the Channel and especially by those looking to invest in wine.

1. The costly VI-1 import documentation for UK and EU wines is no longer going to be introduced in July as previously planned. Taking its place will be a straightforward Wine Import Certificate which asks for basic producer and product information. This means far less admin and fees for wine importers, which in turn means no extra costs will be passed on to customers.

2. Crucially, wines will not have to undergo lab assessment for the new Wine Import Certificate. Submitting wines for lab analysis would have caused backlogs of wines which would have created frustrating shipment delays.

3. While UK wine importers are going to have to get to grips with new processes and forms over the coming months, this is just part of the anticipated bedding-in period which will become second nature as time goes on and as new processes are established.

With the previous uncertainty around Brexit having disappeared with the end of the transition period and with the years to come looking as though they’ll mirror previous years of healthy returns for fine wine, contact us to speak to one of our advisors about creating your portfolio to invest in wine.