Like many of you, I enjoy a nice glass of wine. I don’t consider myself a wine connoisseur by any means. But I know a fine wine when I taste it. Many of you may think about fine wine as expensive. That may be the case. But it isn’t always so.
Though many of you may be collectors of fine wine, have you ever thought about it as an investment? In my experience, most people don’t. They know the quality of the wines they collect will improve. Most are aware that the value increases as well. However, most people I know who collect fine wine don’t view it as an investment. It’s a passion, an active pass time. They enjoy pulling out a nice bottle for dinner. They enjoy sharing their stash with family and friends.
I’ve known a couple of people who have over 2,000 bottles in their cellars. And they can tell you precisely what each bottle is, what they paid for it, and how long it will age. Here’s the problem. When you have that much wine, it’s next to impossible to drink it all.
At some point, the wine will go bad. When that happens, you not only lose the money you’ve spent on it, but you don’t get to enjoy it either. I’ve had two clients over the years who found themselves in that position.
I’ll leave the discussion of the psychology of what would cause someone to have this much wine to others. I would, however, like to offer those who enjoy wine but don’t have the time or inclination to collect and cellar wine an opportunity to learn and potentially make some money by investing in fine wine.
The Money Mix
Maybe you enjoy wine. Perhaps you don’t. Whatever side of the coin you find yourself, I want to introduce you to a unique opportunity the team at The Money Mix (TMM) recently discovered. A brief background about TMM.
Like many blogs who write about money and finance, brands reach out to us to have us represent and promote their products. Frankly, we ignore the vast majority of those outreaches. We are very selective about what we put our name and reputation behind. Vinovest, a company offering a unique way to invest in fine wine, was a brand we felt offered one of the more unique investment offerings we’ve seen. That’s why we agreed to introduce them to you, our readers, and review their unique opportunity to invest in fine wine.
About Vinovest – Sommeliers
The first thing you need to know about Vinovest is this. They have assembled some of the best minds in the wine industry to oversee their wine selections. What makes me say that? Two words – Master Sommeliers. A Sommelier is, in the simplest of terms, a wine expert. There are four stages of training to become a Master Sommelier. Like many designations these days, there are several choices in Sommelier training. The premier organization is the Court of Master Sommeliers. Stay with me. You’ll understand why this is important shortly.
The Court of Master Sommeliers awarded their first Master designation in 1969 in the U.K. Several years later (1977), the Court was recognized “as the premier examing body.” The Master Sommelier is an exclusive club. There are 269 of them worldwide, with 172 that are part of the American chapter (Source: https://www.mastersommeliers.org/about). What does this have to do with Vinovest? A lot.
The Vinovest wine advisory team includes three Master Sommeliers. And one Advanced Sommelier. This group oversees the selections of wines that go into their investment portfolios. Becoming a Master Sommelier is no joke. There are four stages to the process that include an exam at the end of each.
- Introductory Sommelier Course and Exam
- Certified Sommelier Course and Exam
- Advanced Sommelier Course and Exam
- Master Sommelier Diploma and Exam
Candidates must complete all four levels to get the Master Sommelier Diploma. It’s a prestigious club. And the team has three members, and one who is a step away. That shows a commitment to quality and a passion for the industry.
Fine Wine As An Investment
Now let’s examine the merits of investing in fine wine and talk about how Vinovest makes it easier for anyone to do so.
Though most experts don’t consider wine an asset class in the traditional sense, it does fit nicely into the category of alternative investments. The most common asset classes are investments like stocks, bonds, and cash. These asset classes make up the vast majority of investors’ portfolios. Many experts say that a properly diversified investment portfolio should include alternative asset classes.
Alternative investments are things like private equity, hedge funds, managed futures, commodities, and various types of real estate. These investments are often only available to accredited investors. In essence, accredited investors are high net worth individuals or institutional investors that must meet certain income and net worth requirements. In other words, they exclude everyday investors.
Many investment companies saw the opportunity to create alternative investments available to non accredited investors. Crowdfunded real estate is an excellent example of that trend. Vinovest seized the opportunity to develop an investment in fine wine and make it available to smaller investors.
Why Invest in Fine Wine?
Fine wine, like other alternative investments, offer returns not tied to the ups and downs of the stock and bond markets. The advantage to investors is that these assets won’t rise and fall with the traditional markets. They may offer a more stable return. For one thing, you won’t see prices quoted daily, weekly, or even monthly. In volatile markets, that’s a good thing. Fine wine, compared to some of the alternative investments mentioned earlier, has less long term volatility.
The advantage to investors is that these assets won’t rise and fall with the traditional markets. They may offer a more stable return. For one thing, you won’t see prices quoted daily, weekly, or even monthly. In volatile markets, that’s a good thing. Fine wine, compared to some of the alternative investments mentioned earlier, has less long term volatility.
Correlation describes how different assets move with the market. It’s used by investors to determine the mix of assets included in their portfolios. If an asset class is positively correlated (moves in the same direction up or down at the same time), it provides little diversification. Conversely, if an asset class has a low or negative correlation (moves in a different direction as other assets), it provides good diversification.
The team at Vinovest measured their portfolios’ correlation in the last two market downturns. They found it to be negative, meaning it provided good diversification.
How to Invest in Fine Wine
Remember, both accredited and nonaccredited investors can invest with Vinovest. The minimum investment is only $5,000. That opens the door to a much larger group of investors than the typical alternative investment.
Each investor gets a customized portfolio of wine. These wines may include some of the most sought after wines in the world. Keep in mind, when you invest in a portfolio of fine wine, rest assured you own those individual bottles or cases of wine. Vinovest does not securitize the wines. In other words, you don’t own shares or units that represent ownership interests. You own the bottle or cases of wine. It’s a hard asset, not shares. Because investors are not buying shares or derivatives representing ownership, they do not fall under the securities law. That means anyone can buy through their platform.
Investors can invest in one of two fine wine plans – balanced or aggressive. When an investor opens an account, they answer a few short questions that help determine which plan best fits their risk profile. Below is a brief description of the two plans.
- Balanced – Wines in the balanced plan come from the more well-established wineries that have shown to have more stable prices historically.
- Aggressive – Wines in the aggressive plan come from wineries from emerging wine markets (different from emerging market countries). These wines have historical returns that are above the market in recent years.
Here’s what the team at Vinovest says about how they look at investment risk, “We look at the percentage of the portfolio allocated to each wine, the historical volatility of that wine, as well as the total investment amount by the customer.” They take great care in trying to assure investors are in the most appropriate wine plan.
Wine Storage and Guarantee
One of the best parts of investing in fine wine with Vinovest is its simplicity. Before they purchase any cases or bottles of wine, they certify its authenticity. Why is that important? It helps reduce the possibility of fraud in the wines they buy. Plus, they take it one step further to minimize investment risk even more.
Investors’ wine is stored in their state of the art facility that provides optimal temperature and humidity-controlled conditions around the clock. Storing the wine at optimal temperatures and humidity allows the wine to age, improve in quality, and provide the best opportunity for the value to increase.
The storage facilities are in France, the U.K., Switzerland, and other spots around the world. Vinovest tells us the British royal family uses these same fine wine storage providers. If it’s good enough for them, that tells you these facilities are among the best in the industry.
The team chooses the storage facilities so that they don’t have to pay VAT taxes or other excise taxes when they buy or sell the wines. They only use facilities that are bonded. Using these facilities means they can offer investors a full insurance policy on the replacement value of their wines. That’s a huge benefit that can provide peace of mind to investors.
Choosing Fine Wines
The expert team at Vinovest can source wines from vineyards and wineries around the world. They source their wines directly from the wineries, merchants, and via the global wine exchanges. That’s why investors can rest assured that they get only legitimate, high-quality wines. It also offers more transparent pricing.
There are many data points that go into determining whether a wine is investment-worthy or not. Here’s how the team describes the process:
“Every customer’s wine portfolio is personalized based on their risk appetite and desired investment amount. We then take into account millions of historical data points on secondary market pricing, liquidity, producer brand, and equity. We also use different critics scores, age, regional vintage strength, as well as the risk to return ratio of different vintages to buy wines that we believe will increase in value.”
Are There Fees?
Yes. There are fees when you invest in fine wine. Vinovest charges a fee of 2.85% that covers all of its services, including buying and selling the wine, storage, insurance, certification against fraud, and managing the wine portfolios.
If you were to go through any other traditional solution, you’d likely pay 10% to a broker or auction house. They offer no guarantees on whether the wines are authentic. You’d have to figure out your own storage solution. When you decide to sell the wine, you’d pay another 10% to 20% to sell.
Vinovest uses technology to streamline the entire process. That’s why they can keep the fees at 2.85%.
When you consider the traditional fees charged on most alternative investments, the 2.85% fee is reasonable. Though costs for alternative investments have come down, it’s not uncommon for the managers to charge an annual fee plus a percentage of profits.
You don’t have to worry about that here. The 2.8% per annum fee is the only fee charged.
How Do You Get Reports On Your Wine?
Since the Vinovest investment is an online platform, investors can access reports on their wine at any time via their online account. These online reports show the current value of the wines in an investor’s portfolios.
Additionally, Vinovest provides detailed quarterly reports where they recap the wine market and show investors’ portfolio performance.
Can You Drink Your Wine?
For those who want to enjoy their fine wine, the answer to the question is yes; you can drink any of the wines you own. You can request to have any of your bottles shipped to you for the cost of shipping.
For the wine enthusiast, it sounds like the best of both worlds.
What Kind of Returns Can You Expect?
Of course, the answer depends on a variety of things. How much do you have to invest? How long will you keep it? These are the two primary factors. The larger the investment amount, the more you’re able to buy the top tier wines.
Fine wine has provided year on year returns of 11.6% on average since the mid-80s, meaning that it actually outperformed the S&P 500. It has also shown less price fluctuation than traditional alternative assets like gold and real estate. Below is a chart of the returns of the top ten fine wines.
Fine wine investing is likely something most of you reading this have never considered. You probably thought you didn’t have enough knowledge. Or maybe you knew but didn’t have the money you thought it took to get started and grow your collection.
The Vinovest online fine wine investing platform might be the opportunity you never knew existed. For as little as $5,000, you can join the growing list of investors in fine wine. You can watch your portfolio grow, or you can have them send you bottles to drink at any time. Though I didn’t mention it earlier, another benefit of the Vinovest plan is liquidity. You can sell all or part of your portfolio at any time.
If you’ve ever thought you wanted an alternative investment but didn’t know where to start, consider investing with Vinovest’s fine wine platform. If you do, you’ll get an investment that has a low or negative correlation with the traditional asset classes, requires a small initial investment, and offers competitive returns.
And what other investment option offers the opportunity to drink your profits if you so desire?
All kidding aside, I’d encourage you to take a closer look at this unique platform. We think you’ll be glad you did.
Fred started the blog Money with a Purpose in October 2017. The blog focused on three primary areas: Personal Finance, Overcoming Adversity, and Lifestyle. During his time at Money with a Purpose, he was quoted in Forbes, USA Today and appeared in Money Magazine, MarketWatch, The Good Men Project, Thrive Global and many other publications.
I April 2019, Fred, along with two other partners, acquired The Money Mix website. To focus his time and energy where he could be the most productive, Fred recently merged Money with a Purpose with The Money Mix. You can now find all of his great content right here on The Money Mix, along with content from some of the brightest minds in personal finance.