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2010 2nd Edition (Other Editions)


If you do not earn a profit, there is at least one investment that will help you drown your sorrows, investing in wine! Investment grade wine is a somewhat subjective term, but generally, these wines are great vintages from internationally recognized wineries. These wines are perceived to be the best, whether or not you may find them the best tasting wines of their type. On the plus side, wine is one of the few assets with a guarantee of increasing scarcity since the supply is literally consumed by drinkers.

Investment grade wines must age well, tasting better after 20 or 40 years than they did after two. This rules out dry white wines and reds that peak when young. Although some collectors, notably the English, enjoy the toasty taste of fine old champagne, the longevity criterion also precludes sparkling wines.

The retail prices of fine wines have exploded over the past two decades. One survey of Bordeaux prices at auction from 1970 to 1995 showed that appreciation averaged 20% a year.


As an investment, wine has many drawbacks. Unlike stocks and bonds, bottles of wine pay no current return and, with storage, insurance, duties and shipping, often cost money just to own. Bottles of wine are fragile and liquidity (in the investment sense!) is very low. Private sale is illegal in some regions so the resale market consists largely of auctions. Auction commissions paid by the seller can run from 15% to 25%.

Many wine shops offer wine futures, the right to buy a wine at a special pre-released price for delivery at a future date. The futures market is restricted mostly to the finest wines of Bordeaux and to a few recent experimental wines of California.

The wine futures market works as follows. The 1994 vintage was put into barrels in the fall of 1994 on the basis of private barrel tasting and judgments by wine critics on the quality of the grape harvest of the region. The chateau priced the vintage and presold some of it as futures in the spring of 1995.

The wine was bottled and delivered to futures buyers in the summer or fall of 1997. In the meantime, the futures contracts, or the right to take possession of the wine, may continue to change hands, sometimes at escalating prices if further barrel tasting shows even more promise. The futures' price of the extravagantly praised, perhaps overpraised and overpriced, 1982 Bordeaux vintage, for example, doubled in the 18 months before retail release.

The wineries and wine merchants favor futures because they get the use of the buyers' money (either full payment or a deposit) for two years interest free. A strong futures sale creates demand for the wine that is not yet sold, inflating the price when it is finally ready for release to the retail market.

Should a wine collector favor futures? On the one hand, you have an opportunity for a potentially great wine at a cost usually well under the eventual retail price. Waiting for retail release before you buy is pointless, since virtually the entire product of some chateaux is sold as futures.

However, you are buying largely on the reputation of the wine and early judgments from the experts as reported in the trade press. You cannot taste before you buy. There is a risk that you will buy an overrated wine.

If you decide to get involved in futures, study wine industry intelligence about the current vintage, buy only the best known wines, and deal with a reputable retailer. It is not uncommon for retailers around the world to oversell, promising delivery on more wine than a given chateau has produced. Make sure you get a guarantee of full refund with interest.


While we joked a bit about drowning your sorrows, wine investing perhaps should initially be approached as a hobby. You should enjoy the shopping, tasting and consumption of wine and start with an amount of money you could afford to lose, or consume. It certainly might be more fun than buying convertible bonds!