Five Reasons Why Fine Wine is a Good Investment

Lucy Shaw, Contributing Writer

1 August 2023

Explore the key reasons why fine wine is such an appealing investment choice and alternative asset for investors.

Fine wine boasts numerous benefits that set it apart it from other asset classes, with a proven record of low volatility price appreciation. If you’re looking to broaden your investment portfolio and are seeking a safe place to preserve your capital, then wine is an excellent option. Fine wine has historically remained resilient in the face of economic headwinds, serving as an inflationary hedge for investors seeking low correlation assets.

Fine wine has an impressive long-run track record, outperforming equities, oil and gold by a considerable margin, making a carefully selected collection a great addition to a balanced investment portfolio. Broad measures of fine wine have appreciated by over 310% in the two decades to 2024, equating to a compound annual growth rate of over 7%. As a portfolio diversifier, fine wine reduces the overall risk of an investor’s portfolio, protecting wealth and providing strong returns, allowing you to simultaneously grow your passion and profits.

1. Long-term performance

Fine wine has been one of the best-performing asset classes over the last 30 years, steadily increasing its value over time and enjoying a compound annual growth rate of around 8% since the early 1990s. More recently, the fine wine market held comparatively firm during the dark days of the pandemic, registering double-digit growth while the financial markets were in turmoil, and outperformed mainstream equities, crypto currency, gold and oil by a significant margin (see charts) in the months that followed.

While Bordeaux accounts for the lion’s share of trade on LiveTrade, Champagne has been a star performer in recent years, increasing its share of sales from 10% in 2015/16 to 23% in 2023. Appreciation has been broad based with even slightly weaker vintages such as 2009 showing excellent returns. In terms of names to look out for, big guns like Dom Pérignon, Krug and Cristal have made for savvy investments, combining as they do both steady trade and a history of steady price rises. Grower Champagnes – made by producers who harvest their own grapes – from the likes of Selosse, Pierre Peters, Cedric Bouchard and Ulysses Colin are also worth having on your radar, as they saw prices in some instances double since 2022.

With the ability to age gracefully for decades and available in decent volumes, Bordeaux is a mainstay of the wine investment world, and a smattering of classed growth Bordeaux is a must for any wine collector. Investors tend to focus on news releases but some of the more mature vintages have shown good appreciation with, for example, the 1990 vintage returning 12% on LiveTrade in 2023. The ‘Super Seconds’ outpaced First Growths Lafite, Latour, Margaux, Mouton Rothschild and Haut-Brion on LiveTrade over 2022-23, though it was celebrated Right Bank estate Petrus where the most noteworthy advances were made.

Grand Cru Burgundy has also proved a lucrative investment in recent years, with rising demand and a series of small vintages pushing prices dramatically north. Look to names like Leroy, DRC, Georges Roumier, Sylvain Cathiard and Armand Rousseau, which have a proven track record and a strong resale value. Burgundy sales at Bordeaux Index have grown strongly in recent years – up over 100% in 2022/23 vs 2015/16.

Trade in Italian wine has ticked-up markedly as demand for the top names of Tuscany – Tignanello, Sassicaia, Ornellaia and Solaia – has soared. Across the board in Italy the 2010, 2014 and 2016 vintages increased their value by over 14% in 2023 with demand focussed particularly on the on-trade. The Rhône is an often over-looked region for investment but certain wines in certain vintages have experienced strong growth recently – Look to top Guigal, Rayas, Chave and others to start with.

LiveTrade Fine Wine Investment Bordeaux Index

2. Capital preservation

Wine’s evolving supply-demand balance is a key contributing factor to its strong capital preservation. While oceans of wine are made around the globe each year, only a fraction of it qualifies as ‘investment grade’. These wines are produced in top terroirs in limited quantities, often-under strict legal prescription and are built to improve with age.

The scarcity and finite supply of investment grade wines is a key driver behind fine wine’s long-run appreciation. While the focus is often on the expanding demand side - fuelled by new wealth from emerging economies – the progressive restriction of supply at the apex of the market to maintain quality and manage distribution is at least as important. Moreover, the effect of climate change has been to, and will increasingly, result in both reduced and inconsistent harvests. Surging demand and shrinking supply increases the likelihood of stable price appreciation over time, particularly among the most sought-after labels. As these wines mature and enter their drinking windows, supplies fall even further and demand reaches fever pitch, as consumers and collectors seek to snap up coveted cases before they disappear from the market altogether.

A further stabilising feature of fine wine is that it is a hard asset, which is to say a tangible asset with inherent value. While stock markets can crash unexpectedly and share prices can tumble overnight, tangible assets don’t tend to behave in the same way. These physical assets with an intrinsic non-zero value have little to no connection with central bank policies. Like property, fine wine is known to hold its value, but unlike real estate, it can be traded quickly and easily from anywhere in the world without the high maintenance costs associated with property ownership.

3. Liquidity

While it could take years to find the right buyer for an Old Masters’ painting or your beloved Aston Martin DB4, if you were seeking to free up some capital from your wine collection, you could do so in a matter of days. Unlike other luxury assets like cars and watches, the fine wine market is well established with an efficient secondary market. Platforms like LiveTrade – Bordeaux Index’s market transforming fine wine trading platform –have helped to bring transparency and liquidity to fine wine, boosting investor confidence. Taking in 100’s of the world’s top wines, LiveTrade+ boasts firm bid and offer prices 24/7 on wines from fine wine regions such as Bordeaux, Champagne and the Super Tuscans.

Wine is a low-stress investment that doesn’t require constant attention or frequent trading but with Bordeaux Index’s LiveTrade platform you can instantly buy, sell and place bids and offers on 100’s of labels and vintages from around the globe. With no joining, membership or subscription fees, firm buy-and-sell pricing on wines with impeccable provenance on LiveTrade+, and quick settlement on receipt of sold wines, buying and selling wine on LiveTrade couldn’t be easier, even when it comes to some of the rarest names in the market. .

Bordeaux Index is focused on facilitating the best prices and tightest trading spreads, as an efficient market means increases volumes, activity and liquidity. Taking a dynamic, disruptive and distinctly modern approach to wine investment, its unique model has proved a hit among customers seeking 24/7 two-way market access to fine wines.

4. Inflation Hedging

As a hard asset with an intrinsic non-zero value and limited connection to central bank policies, fine wine has particular appeal in an environment in which inflation has again come to feature prominently. Additionally, with a truly international client based, grounded in no small part in the growing pool of UHNWIs, fine wine tends to be less exposed to the economic conditions of producer countries. Consequently, it is significant that fine wine has a track record of particularly high levels of protection against inflation, outperforming assets such as land and gold.

5. Tax efficient

Another appealing aspect of fine wine investment lies in the fact that 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.

Get in touch

If you’re looking to build a fine wine or rare whisky collection then Bordeaux Index’s fine wine trading platform, LiveTrade, is a great place to start. LiveTrade is the only fine wine trading platform of its kind, allowing anyone with an interest in wine to instantly buy, sell and place bids and offers on 1000’s of top producers and vintages from renowned wine regions like Bordeaux, Champagne, Italy, Burgundy, Napa Valley and beyond. Its team of experts will be able to arrange a complete investment proposition for you including storage in a bonded warehouse and the correct insurance to protect your collection.

Read all about why LiveTrade is the Best Fine Wine Trading Platform.

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.