Cult Wines: The Guide to Wine Investment
Author: Liz Andersen
I am pretty certain that we are all encouraged by the ‘glimmer of hope’ mentioned by the Government in the last few days, re relaxing the lockdown rules, albeit in a very controlled way. All of us will have felt the impact caused by this wretched virus and so will our economy …… which will remain positively battered and bruised for months to come.
In situations like this, it common for people to look for other options for their savings …… I can’t be the only one who seems to receive daily emails telling me that my already paltry 0.55% cash ISA is going to be paying 0.25% from now on. Ouch!
While stock markets across the world have taken a massive hit, other collectibles appear to do well, almost in spite of what is going on in the world around them …. Whether that is gold, stamps or indeed fine wine. If you looked at the value of fine wines alone, their value has risen by 20% over the past year. Makes my 0.25% look pretty miserable.
But how do we invest in fine wines, often referred to as Cult wines? Do I need substantial amounts of money to invest? Do I need extensive fine wine knowledge?
How to invest in fine wine
The first thing I discovered is that my vision of rummaging around to buy a dusty bottle from an old-fashioned shop, was wrong. As with most things, there are now shiny hi-tech tools and trading platforms to assist us. Wine investment is certainly more accessible now than ever.
I looked at some of the facts and figures produced by Telegraph Money recently who reliably quote that “the 10 best performing investment wines over the past 5 years have increased in value by an average of 150%”. Cult wines are also seen as trophy wines to be held rather than drunk, and it is very true to say that with these wines, price is often seen as an indicator of quality. Therefore, raising the price can increase the desirability of investment wine.
So here are some of the ways to invest if you fancy dipping your toe in:
Buying wine ‘in bond’ : these are wines stored in HMRC warehouses on which neither duty of VAT have yet been paid. These are only paid if you actually take delivery of the wine. VAT is calculated on the original price rather than its current value. Sell the wine in bond, and you don’t pay taxes at all. Storage conditions are perfect for wines. It costs around £10 to £15 annually to have a 12-bottle case of wine stored in a bonded warehouse. Wines in bond can be bought online via various wine dealers, including Berry Bros, Lay & Wheeler and Corney & Barrow.
Wine Brokerage services: these companies offer broker services if you want to sell your wine and typically take 10% of the sale. Some also allow investors to buy and sell ‘in bond’ wine via online trading platforms such as Berry Bros.
Wine Investment Funds: similarly to other investment funds, this allows you to invest, but someone else makes the decisions about what to buy and sell, and when. The Wine Investment Fund was set up in 2003 and invests in Bordeaux wines held in bonded warehouses only. If you have a minimum of £10,000 to invest, this could be suitable for you.
En Primeur/Wine Futures: this is a method of buying wines early, in fact while it is still in the barrel. By paying early for the wine, usually 12 – 18 months prior to the bottling and release of the wine, the wines may be considerably cheaper than when they are released to the market. Of course, no guarantees are available. En primeur wine can be bought online through wine dealers and can be held in bond if you wish until you are ready to take delivery.
Buy Wine and Store Yourself: The simplest option if you have a bit of wine knowledge, is to buy fine wine and store it yourself. If you have suitable cellarage or storage in which you can control temperature and humidity, this might be the way forward.
As with any investment, there is risk, but no guarantee of a return, but perhaps adding a small element of wine investment into the mix would appeal …..