While illiquid assets like fine wines (no pun intended) and other collectibles probably should not form the bulk of your holdings, there is certainly a place for them in a well-diversified investment program. And especially if you’re already passionate about such holdings, there’s no reason why you shouldn’t include them as part of your portfolio. However, it’s important to remember that such investing is not the same as owning assets for which large, widely accessible markets exist.
On the other hand, if you already have a deep interest in collecting fine wines you’ve probably taken the time to educate yourself pretty thoroughly in the finer points. Particularly for those wines you care the most about, you likely already have a pretty good idea of what constitutes an investment-grade wine (i.e., one that is likely to appreciate in value over time).
All that said, there are a few tips that can help you more profitably incorporate your passion for wine with your other investments.
- Carefully source your information. Though not as widely available for collectibles like fine wine, accurate information is still key. Websites like wine-searcher.com can help you stay abreast of current trends, market prices, and expert opinions. You can also follow the London International Vintner’s Exchange Fine Wine 100 index to keep tabs on purchase and sale prices for top wines.
- Condition is vital. Buying a case of a highly collectible wine accomplishes nothing if you can’t verify its condition, how it has been stored, and your own ability to keep the wine in perfect shape while in your possession. An expensive vintage that hasn’t been well handled is like an original Honus Wagner baseball card that’s been used for a bookmark.
- Infrastructure cost. And speaking of keeping your wine in top condition, it’s vital to consider the costs involved in acquiring and maintaining a high quality storage system for your collection. Given that a residential wine cellar of the capacity a true investor/collector would need starts at around $15,000 and can easily run to $200,000, this isn’t a pursuit for those lacking expendable resources.
- Patience. Like fine wine itself, your investment takes time to mature. Most experts say you should expect to hold your purchase for 7 to 15 years in order to realize maximum resale value, and some wines can age for 25 years.
- Deal only with reputable brokers. Because of the relatively small pool of qualified dealers for fine wines, you should work only with those who have demonstrated expertise and a good reputation in the industry.
At Empyrion Wealth Management, we specialize in helping clients build portfolios that reflect their passions. If you’d like a second opinion on your wealth management plan, click here to learn more.
Stay Diversified, Stay YOUR Course!