by Find out More about Wine Investing
As we have shared prior, alternative investments are generally designed once you have a foundation of investment well defined (i.e. 401k, Mutual Funds, Stocks, Real Estate) and for most portfolios it should be limited to 10% of your total investable assets.
Alternative investments can certainly be some of the more entertaining ways to invest and if they help keep the mentality of having fun while investing in something that has the opportunity to provide you a return then we are certainly all for it. One alternative investment that we feel many people may enjoy is that of wine investing.
What Piqued our Interest
Before we share about a concept, Joe and I have generally tried it in some fashion. With wine investing we had heard of others investing (generally those in the very high income brackets) in wine prior but we had not had the opportunity to invest as there seemed to be a great deal of mechanics involved with investing in the product. For example we were told you need to consider everything from the vintage, winery, storing at proper temperatures, taking to auction, chain of custody, and more which seemed a bit too challenging considering the amount we would start with would obviously be modest to start.
Of course, just as we were doubting the possibility of investing in wines, we were presented with an interesting piquing ad via Facebook. It showed a bottle from the Screaming Eagle winery (in Napa, California) that was purchased for $850 in 2010 and sold for $4,035 in 2020. That’s nearly a 5x return over that period of time and that made us want to find out more.
Vinovest, Creating a Platform Like the E*TRADE for Wines
Clicking through the ad gave us more information about a company called Vinovest. They have created a platform that allows “normal” people to invest in wine without dealing with the hassles of storage, chain of custody, etc. In this context they made a compelling case for lowering the barrier to entry and compared themselves to gains in the S&P 500 Index (right up the alley for comparison as an investment.
According to their analysis Wine has out-performed the S&P 500 by 1000% over the last 20 years! That is a strong argument to make an investment in wine. Now, just so you don’t rush and put all of your investment dollars in wine, keep the following items in consideration for this particular alternative investment:
- Wine does charge a % of your portfolio (2.4%-2.8%) which is much higher than the often <1% that comes along with mutual fund investing
- Wine is not as easily moved when compared with stocks or mutual funds. It can take weeks to sell your wine
- Wine does not provide quarterly dividends, you are only banking on appreciation so there isn’t the dollar cost averaging component made available through dividend reinvestment
With that being said, we still felt it was worth the opportunity to try. When we decided to open an account the minimum was lowered to $1,000 to start. For those that have invested in stocks prior this may sound steep as with the ability for fractional ownership in stocks these days you can truly get started for as little as $20 with stock considering most platforms have eliminated trading fees as well.
The $1,000 certainly is necessary for this investment as they tend to purchase half cases (6 bottles) and with wines generally $100 or more per bottle you can see how they need to set a starting point that is larger than stock accounts.
Unique Aspects to Consider About Wine Investing with Vinovest
- You actually own the wine. Yes, the bottles you see in your portfolio are yours and you can have them sent to you if you wish…just try not to drink up your gains
- You can end up owning more than wine (i.e Champagne)
- They send out quarterly updates on the wine market (like companies report for their quarterlies)
What the fine Print Didn’t Say
- You don’t really get to do analysis on possible wines like you do for stocks
- At $1,000 you don’t get to select any wines, they are selected for you by their AI and that can take days to even a couple of weeks
With the initial investment I contacted Vinovest as I did think I was going to be able to pick “Screaming Eagle” like I saw in the advertisement. I spoke with a wine advisor, named Bradley, and he did give me a great run down on the wine market and the investing as a whole. Truly the pitch is that it should be looked at more like mutual fund investing (i.e. get your account up to $10,000) as diversity and time (i.e. minimum 3 years) is essential to performance.
My First Wine Purchase After 3 Months
Like most long term investments it is hard not to check it more often but one must be patient. After a few months I can share that the original purchase of a half case of wine is up 11.8% which is pretty solid. You can see a screenshot below of that purchase and we will update periodically to share the progress (good or bad)
While we are still early on in the investment cycle with Wine (via Vinovest) it has been exciting to learn more about this as an investment. Will it really beat the S&P 500 index over the next 20 years, we can’t really say but if you want to have a bit of fun, learn about a new product to invest in, then investing in wine might be worth some of your hard earned dollars.
