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How to Start Investing in Fine Wine

Lucy Shaw, Contributing Writer

1 August 2023

Looking to build a fine wine portfolio but don’t know where to start? Read our guide on How to Start Investing in Fine Wine.

If you’re looking to broaden your investment portfolio and are seeking a safe place to preserve your capital, wine could be an excellent option for a multitude of reasons. During turbulent times of stock market volatility, fine wine has a history of price appreciation and has remained remarkably resilient in the face of ongoing economic headwinds, proving itself as an inflationary hedge for investors seeking low volatility assets. Fine wine also has a low correlation with other asset classes that benefit from interest rates like bonds and is therefore a useful diversification tool. When inflationary pressure reduces the interest rates on other assets, fine wine holds firm and retains its value.

Fine wine is big business – in 2022 Vantage Market Research valued the global wine market at £350 billion and predicted it to be worth £500bn by 2028, making a curated fine wine collection an ideal addition to a balanced portfolio. Fine wine has appreciated by over 310% in the two decades to 2024, equating to a compound annual growth rate of over 7% (according to industry sources).

LiveTrade Fine Wine Investment Bordeaux Index

Why invest in wine?

Part of the appeal of investing in fine wine lies in the fact that wine is a tangible asset with a finite supply, a track record of reliable returns and a low market correlation with other mainstream assets, meaning it offers a degree of stability during periods of economic uncertainty and rising inflation. Fine wine has performed favourably against most asset classes both in the short and the long term. 10-year compound annual returns to end-2023 were over 5% and, according to Deloitte/Credit Suisse analysis, real annual returns have exceeded 7% since post-WW2. This growth has been achieved with low volatility as illustrated by the fact that there are nearly no periods in the last three decades in which an investment in wine would have produced negative returns.

Unlike shares or buy-to-let properties, you don’t typically need to pay Capital Gains Tax on any realised profits from your wine portfolio due to it being classed as a ‘wasting asset’. HM Revenue & Customs usually considers most unfortified wine to be a commodity that has a lifespan of less than 50 years, despite the fact that fine wines often appreciate in value within that time frame.

Where to begin in wine investment

Before diving into the fine wine market, there are several things to consider. As with any investment endeavour, it’s important to understand the risks involved. Much like it takes time to craft an age worthy wine, seeing a steady return on your investment takes time and requires patience. There have been periods in which prices have appreciated rapidly, but we would strongly encourage investors to consider wine as a long-term asset with a minimum horizon of three years, ideally more, allowing for maturity development and market consumption.

If you’re keen to start exploring the fine wine market then it’s important to keep your financial goals in mind and be prepared to ride out the market ups and downs that come with any investment. Work out your budget beforehand and do your homework by seeking the expert advice of one of Bordeaux Index’s private client managers. You’ll better understand the fine wine market and how you might be able to make a profit from it, while ensuring that you’re comfortable with the level of risk involved in such an undertaking.

Primary vs. secondary wine market

It’s important to understand the differences between the primary and secondary markets when it comes to fine wine. In the primary market, wine moves from the producer to the consumer via wholesale distributors and retailers. Most wine investment takes place on the secondary market, where collectors and investors sell wine through merchants like Bordeaux Index, auction houses, brokers and online trading platforms like Bordeaux Index’s market transforming fine wine platform, LiveTrade. Bordeaux En Primeur also provides an important buying point for investors. Though not the force it once was, it provides opportunity for investors to purchase wine with an expectation that the wine will increase in value in the coming years.

Unlike other luxury assets, the fine wine market is well established with an efficient secondary market. Boasting firm bid and offer prices 24 hours a day, LiveTrade has helped to create price transparency, market information and liquidity in the fine wine sphere, boosting investor confidence in the category. With wines now available from key regions such as Bordeaux, Burgundy, Champagne, Tuscany, Rhône and Napa Valley, LiveTrade+ has opened up more transparent pricing on 100’s of the world’s top wines.

What is an investment grade wine?

When it comes to fine wine investment and choosing which wines to add to your portfolio it is important to target the right type of wine. There are several factors you need to consider when picking wines for your portfolio, as they need to meet certain criteria to be considered ‘investment grade’.

The best wines in the world, which have sufficient demand in the secondary market to support ongoing price growth, are considered investment grade wines. They are generally produced in limited quantities under strict conditions and are built to improve with age. As the wines mature and enter their drinking windows, supply dwindles and demand increases, as investors seek to acquire coveted cases.

What makes an investment grade wine?

When weighing up which wines to invest in, age worthiness is an important consideration. When it comes to a wine’s structure, you should be seeking out expressions with some combination of high acid and firm but fine-grained tannins, developed intentionally to improve with time in bottle. To have a portfolio with a strong resale value on your hands, you should typically be looking for wines that won't be entering their drinking windows for at least a decade, and ideally longer. However, it can also be wise to purchase a mixture of recent releases and older vintages to achieve some internal diversification of your portfolio.

Pedigree is incredibly important when it comes to investment grade wines with a proven track record over time. In Bordeaux this is commonly the five ‘First Growth’ estates: Château Lafite, Château Latour, Château Margaux, Château Mouton Rothschild and Château Haut-Brion, though this also extends to the second and third growths within the 1855 classification, and down to fifth growths in the case of Château Pontet-Canet. Over on the Right Bank, the likes of Pétrus, Château Ausone, Château Cheval Blanc and Le Pin are solid choices with a proven track record, as is Château Figeac, which was promoted to Premier Grand Cru Classé ‘A’ status in the 2022 Saint-Emilion reclassification. Investment grade wines used to be pretty much exclusive to Bordeaux, but these days there are highly sought after wines from just about every major wine region. It is a golden age for wine drinkers, and investors can also seek to benefit from the abundance of investment grade wine entering the market.

Critics scores and fine wine

When considering fine wine investment, individuals should also focus on wines that have proved themselves over time via high critics’ scores from the likes of Neal Martin, Jane Anson, Jancis Robinson MW, Allen Meadows and Antonio Galloni. Critics’ scores can have a profound influence on buying habits and consequently prices. Once a Parker-centric world, nowadays there is a profusion of critics with opinions on all the most important wine regions when it comes to fine wine investment. Scores will, of course, vary from vintage to vintage and from critic to critic, but it’s worth selecting estates that have performed strongly and consistently over the years, as these tend to retain their value and will be easier to sell on.

Protecting your alternative assets

As a rule, original packaging makes for stronger investments than loose bottles, as they’re easier to trade on. The best way to look after your investment wines would be to store them in a bonded warehouse – tax free zone - where they will be kept pristine in temperature and humidity-controlled conditions, such as world-class facility Octavian in Wiltshire (Bordeaux Index’s storage facility). Storing wines in a bonded warehouse means that you don’t have to pay duty on them – the price you pay is the ‘in bond’ price, with duty only applicable when they are released from the warehouse.

Lauded labels

As with any investment, having an open mind is important, as is spreading your risk by investing in fine wines from several different regions and countries.

While it might be tempting to plough all your money into classic Bordeaux, Champagne has emerged as an increasingly important feature of the market since 2019, with impressive price gains and consistent demand. Big hitters like Dom Pérignon, Krug and Cristal make for canny investments, particularly those from lauded years like 2002 and 2008, though grower Champagnes like Selosse, Pierre Peters, Cedric Bouchard and Ulysses Colin are worth having on your radar as prices have soared in recent years. Grand Cru Burgundy is also proving a lucrative fine wine investment, with demand rising off the back of shrinking stocks. Look to names like Leroy, DRC, Georges Roumier, Sylvain Cathiard and Armand Rousseau, which have a proven track record and a strong resale value.

While the lion’s share of investment grade wines hail from France, Italy has proved its mettle in recent years as a solid investment choice, particularly when it comes to the ‘Super Tuscans’, such as Sassicaia, Ornellaia, Solaia and Tignanello. Outside of Europe, California is also a source of several investment grade wines offering strong returns, namely in the form of ‘cult’ California Cabernets such as Harlan, Screaming Eagle and Dominus.

Get in touch

As for how much you need to start your collection, a decent portfolio offering optimum returns and a good level of diversification can be compiled with an initial investment of around £10,000, though people have started with less, and a few savvily selected cases can get you going down the investment path.

If you’re looking to start building a fine wine portfolio and begin trading on the world’s leading fine wine platform, then Bordeaux Index’s team of expert advisors are on hand to help you get started in the LiveTrade Marketplace, allowing you to create a bespoke wine collection in no time.

For more information visit our Investment Page or get in touch at [email protected]

Disclaimer: This document does not provide tax or accounting advice, Bordeaux Index are not tax advisors. You should consult your own advisers in relation to these matters if required.