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The Capital Vintners Guide to Fine Wine Investment – Part 2

19th November 2015


The Basics – How to begin a vintage wine collection

Diversifying into alternative types of investment can seem a daunting task, let alone putting together a cellar full of carefully chosen vintage wines. In the second part of our beginner’s guide for novice wine collectors, we want to explore the practicalities of getting started with that first portfolio.

What happens to my wine?

When you buy a case of vintage wine, it is transported immediately to professionally managed storage facilities, or kept “in bond”. This is of paramount importance, as bottles stored in personal cellars may lose market value due to unknown provenance.

The wine remains in bond until you choose to sell it, or drink it. Most investment grade wine will change hands four or five times and never be removed from professional storage.

Top tips for wine investment

Like any business venture, investing in vintage wine needs careful consideration in terms of financial goals and expectations.

  1. Set your goals and stick to them

You may be looking for a new hobby, a secure return on your money or just a selection of the world’s finest wine to sample at your leisure. Whichever it is, being clear on your objectives from the start will enable you to make the most out of your portfolio.

  1. Be willing to wait

Investing in wine requires a “buy and hold” strategy. Short-term returns are modest, while good come to those who wait. The minimum time frame in which you can expect to see a return is 3-5 years, though the longer you wait, the higher returns you will enjoy.

Take the example of John Costello, the former chief global marketing officer for Yahoo!. Nineteen years ago, he bought 1982 Château Margaux, one of the most famous Bordeaux vintages, for less than $300 a bottle – it is now worth over five times that amount.

  1. Get your figures straight

The generally accepted figure regarding average returns on a portfolio of top Bordeaux wines is 50% over 10 years. That’s with an initial capital outlay as low as £5000, though it is normal to invest £10,000 or more.

  1. Trust your palette

Most novice collectors go into wine because they like drinking it. Fine wine is one of life’s great pleasures, and combining pleasure with profit is always an attractive option. That’s why we always advise people to buy wines they enjoy.

  1. Know your wines

If you’re setting your sights on that dusty old bottle of red you found at the back of the cupboard, you may have to think again. An investment grade wine must have three key characteristics:

  • The ability to age and improve over 15-25 years
  • A solid demand on the secondary market
  • A powerful brand image

Sometime it is also useful to consider wine scores given by critics. The classic score is a 100-point scale, with 95-100 representing an excellent wine. Commonly cited critics include Robert Parker (RP), Wine Spectator (WS) and Wine Advocate (WA).

What to include in your wine collection

These criteria narrow the selection of investment grade wine down to two main wine producing regions – Bordeaux and Burgundy. However, with new vintages on the horizon and a generally shifting picture where trade is concerned, it’s an exciting time for wine investment.

Next week we will be exploring the great wines themselves in the final part of our guide for the novice collector. Our team at Capital Vintners is always on hand to answer any specific queries you may have.

 

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