| Why Invest In Wine? |
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| Written by Dezmand Chin |
| Wednesday, 17 February 2010 18:43 |
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Investment in wines is not new. Those with professional knowledge of the finest vintages and top chateaux of Bordeaux have been exploiting this sector for hundreds of years. Over the last quarter of a century, fine wines have proved to be one of the most consistently stable, high yield and low risk investments in the world.
Investment in wines is not new. Those with professional knowledge of the finest vintages and top chateaux of Bordeaux have been exploiting this sector for hundreds of years. Over the last quarter of a century, fine wines have proved to be one of the most consistently stable, high yield and low risk investments in the world. With capital growth of over 300 per cent since 1992, wine as a commodity has outperformed the FTSE 100 index, Victorian art and gold, offering significant returns without the volatility of the stock market. Wine investment guru, Mahesh Kumar in his famous book, Wine investment for Portfolio Diversification indicated that, portfolios consisting of fine wine have a greater expected return per unit of risk. In addition to capital appreciation, wine investment can offer diversification rewards by virtue of a low correlation with both equity and bond markets. Wine can, and often has, outperformed the FTSE 100 and the Dow Jones, offering substantial returns without the volatility of the stock market. Wine is an effortlessly transferable asset; there is an established fine wine marketplace and a booming auction market. Wine-based investments received a shot in the arm with the formation of the London International Vintners Exchange (Liv-ex) in 1999 which operates an internet and phone-based information and trading platform for fine wine merchants. Generally, wine doesn't attract capital gains tax as it is considered a wasting asset by the revenue. The fine wine market tends to be less volatile than financial markets and is less prone to market downturns and adverse economic conditions; only global recession seems to significantly affect wine prices. Still, fine wine has proven to be an reliable hedge against recession, inflation and financial assets. Fine wines mature and enhance with age and have a lifespan of up to 50 years In addition to capital appreciation wine investment can provide diversification benefits by virtue of a low correlation with both equity and bond markets. When considering a fine wine investment as a luxury gift, it is a good idea to include wines from both the top French houses as well as some of the lesser known vineyards. High capital appreciation of fine wines As is the case with all assets, values can go down as well as up. Apart from the early 1990s and end of 1997 glitches, values for fine wines from the best vintages have escalated greatly over the past 20 years and the wine investment market has, in the case of well-managed portfolios, proved to be a happy hunting ground for the knowledgeable and well-advised speculator. Fine wine as an investment has many advantages over other structured investments - such as unit trusts, bonds and equities - as it benefits from the following attributes: * Tax Free * World-Wide Demand * Increasing Rarity * Deceasing Availability * Low Risk * Easily Realisable * Personal Ownership * No Annual Management Fee Global interest for investment quality wine has expanded enormously over the last two decades. Supply however has fallen due to limited international productivity and this creates the basis for a very lucrative and steady market. Also consider these favourable factors: * Firstly, fine wine has benefited from a dramatic rise in popularity and there is an recognized and blooming fine wine auction market. Therefore, it is very unlikely that demand will abate. * Secondly, wine is a transferable liquid asset. * Thirdly, there is no limit to the volume you can invest in wine and as wine is a 'perishable' item, it is not subject to capital gains tax. * Lastly, returns aside, a superb bottle of fine wine is satisfying to the taste and senses. You can literally enjoy drinking your investment. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Stop by Profiters website for wine investment expert advice, buying wine futures En Primeur and selecting the best vintages to maximise your investment returns. Learn more about wine investment today. |