In the past few years, wine has made an entry into one of the most viable investments. Wine has the ability to thrill both the collectors and the investors. This is because it offers attractive diversification potential and good returns. It also goes great with shipping containers. I joke, but read on to hear a bit about my second favorite investment on the earth.
A Cellar Investment
The tradition strategy applied in the wine market involved buying and hold. Buy and hold refers to the purchase of bottles immediately they are made available for sale on the market and ends when the wine reaches maturity. The investor makes a financial profit once he sells the wine on the secondary market.
In Bordeaux, for example, the primary market works on the same principle as that behind future contracts. During the spring, after the last vintage is harvested, the wines that are still in barrels are offered to buyers through merchants and traders. Payment is wired alongside the order and delivery is effected once the wine has matured, close to 18 months later.
In other wine growing areas, wines are sold once they have been bottled through a mix of direct sales and intermediaries. The secondary market, in such regions, is fragmented and decentralized. In general, the wine industry features relative opacity, complexity, and low liquidity.
Such characteristics have significant effects, especially for novice investors. The market features make wine valuation a very complicated undertaking and can also make it hard to sell wine at a price similar to its value. Additionally, the features make it hard and expensive to employ strategies that go beyond buy and hold strategies.
In Bordeaux, for example, the primary market works on the same principle as that behind future contracts. During the spring, after the last vintage is harvested, the wines that are still in barrels are offered to buyers through merchants and traders. Payment is wired alongside the order and delivery is effected once the wine has matured, close to 18 months later.
In other wine growing areas, wines are sold once they have been bottled through a mix of direct sales and intermediaries. The secondary market, in such regions, is fragmented and decentralized. In general, the wine industry features relative opacity, complexity, and low liquidity.
Such characteristics have significant effects, especially for novice investors. The market features make wine valuation a very complicated undertaking and can also make it hard to sell wine at a price similar to its value. Additionally, the features make it hard and expensive to employ strategies that go beyond buy and hold strategies.
Investing Through Funds
Difficulties in the wine market prove that it is important to have deep knowledge of the market before investing. This is why specialized funds have been developing to allow even novice investors to position themselves better on the market. However, they are quite expensive due to their management fees. For this reason, it is important to analyze the net value added by the manager.
Prevailing Context
The wine market is extremely dynamic, especially over the past three years.
In the past three years, Bordeaux has recovered after about five years of change. The arrival of two vintages played a significant driving role for the area. Prices, in the current context, are now close to the highs experienced in 2011.
Burgundy has maintained its upward trajectory for a decade now. The rarity of these fine wines has been strengthened by the notion that vintages, in the past few years, have been very qualitative and not quantitative. For this reason, the imbalance between supply and demand has promoted further price rocketing.
Other wine areas that were significantly behind Bordeaux and Burgundy have gained considerably in notoriety. This is evident in Italy, where some wine prices have been multiplied threefold in just over five years. Clients like the classicism associated with these wines.
A decade ago, the market only appreciated concentrated and powerful wines made in style. Today the key adjectives are authenticity and finesse.
In the past three years, Bordeaux has recovered after about five years of change. The arrival of two vintages played a significant driving role for the area. Prices, in the current context, are now close to the highs experienced in 2011.
Burgundy has maintained its upward trajectory for a decade now. The rarity of these fine wines has been strengthened by the notion that vintages, in the past few years, have been very qualitative and not quantitative. For this reason, the imbalance between supply and demand has promoted further price rocketing.
Other wine areas that were significantly behind Bordeaux and Burgundy have gained considerably in notoriety. This is evident in Italy, where some wine prices have been multiplied threefold in just over five years. Clients like the classicism associated with these wines.
A decade ago, the market only appreciated concentrated and powerful wines made in style. Today the key adjectives are authenticity and finesse.
—Jacques Piccard, Managing Director of Davenport Laroche, Shipping Containers and Alternative Investments
Jennifer Hooper says
October 31, 2018 at 7:42 pmAuthenticity and Finesse. Super smart, but all I can think about is the fact that when I crush them grapes and make my own label it WILL be called Finesse Wines