Long-term investment? Wine is at lower risk than stocks

Demand

Thousands Of Years Of Market Demand Continues

Wine is the world’s oldest and most demanded luxury product, and since ancient Greece and the Roman Empire has been sought after by royalty, nobility, and the upper classes. The best and most exclusive luxury wines constitute less than 0.1% of world wine production. The most expensive and rarest wines are also status symbols, and strong growth in the number of rich and super-rich people worldwide means that demand, and hence also prices, increase yearly.

Watch the video: Why Invest in wine?

Investing

Historically, Wine Is The Best Investment

Wine is the perfect investment as the risk is substantially lower than for investments in the stock market. Where share prices may increase one day and decrease the next, wine provides stable returns year after year and only very rarely decreases in value. Since 2004, Burgundy wines have yielded a return of 651%¹ and Champagne 483%² whereas, over the same period, the stock market, with a return of 412%³, has provided a significantly lower yield. That makes wine a better and more reliable investment than both real estate and stocks.

Market Performance Since 2004

1: Liv-ex Burgundy 150
2: Liv-ex Champagne 50
3: MSCI World net total return in EUR.

Continuity

+ 8% Annual Return

The average annual return on wine has been +8 % for the past 16 years, and it is expected that the price of wine will continue to increase at the same rates. This is due to several factors, including limited constant production, increasing demand, ongoing consumption, and rising production costs.

Constant Production

The production of the best and most exclusive wines is very limited. As the world’s best vineyards are already fully planted and their area cannot be extended, increased demand cannot be responded to by increased production, but only by higher prices.
Increasing Demand

Demand for expensive and exclusive wines is increasing significantly. This is because the world is experiencing both strong growth in the number of wealthy people and a rising global interest in wine, particularly from the “new” economies, including the BRIC countries where a new generation of new wealthy persons increasingly demand luxury goods.
Ongoing Consumption

Our daily consumption of wine continually reduces the supply, resulting in price increases for the remaining bottles. Ongoing consumption is, therefore, an important parameter and often a prerequisite for increases in the price of wine. That is why it is vital to bear in mind ongoing consumption when investing in wine.
Rising Costs

Wine is an agricultural product, and when the production of wine cannot be outsourced and the perception is that machines cannot replace the most skillful wine producers, the cost of production increases. Thus, the price of wine will, at minimum, rise in line with the general price movement; hence, wine investment is secured against inflation.

Find answers on frequently asked questions here

Stability

Put Yourself In A Strong Position If A Crisis Strikes

The financial crisis is the perfect example of the resilience of wine investment to crises and challenging times. From November 2007 to April 2009, the stock market's value was almost halved¹, while the price of wine behaved quite differently. Here, the price stagnated only after a period of increase. It never went worse than Champagne, falling by only 3.6%, when it did worst after the Lehmann Brothers crash, and Burgundy fell by only 0.9%.

By comparison, it took four years from the peak of the financial crisis until the stock market had fully recovered and returned to the same level as before the crisis².

The Corona pandemic is also an excellent example of wine being a solid asset in times of crisis. The stock market also did well during the Corona crisis, primarily spurred by global, loose monetary policy and the fact that national banks, prompted by political intervention, have sustained and boosted both businesses and the market. Something there is no guarantee will happen when the next crisis or "black swan" hits.

Wine as an investment provides a higher return than the stock market and is also remarkably resilient during times of crisis.

From a historical point of view, wine has yielded high returns during good times and has preserved capital during hard times.

Despite a low risk, wine has delivered better returns than the stock market and real estate over the past 18 years.

Wine can, to your advantage, be included as a low-risk element in an investment portfolio similar to bonds and other capital-preserving assets and can contribute to spreading risk and increasing returns on the investment.

The Financial Crisis 2007-2009

1: From November 2007 and the following 17 months, the value of MSCI Europe Net Returns measured in EUR dropped by 46,9%.

2: At the beginning of March 2013, four years after MSCI Europe Net Returns’ was at its lowest (measured in EUR) in April 2009, the stock market was at the same level as the pre-crisis level back in November 2007.

Capital Preservation

A Strong And Capital Preserving Asset

With a wine investment, you will have an asset that has delivered not only stable and solid returns but also an asset with unique capital-preserving properties. This makes wine a perfect investment whether you wish to increase or preserve your fortune.

Wine has substantial capital-preserving properties because it is an ungeared physical product. It will not lose its worth overnight. In other words, if the wine was sought after yesterday, it will also be sought after tomorrow and will, therefore, rarely lose its value.

Wine prices are also sensitive to external factors, but significantly less when compared to, e.g., stocks. When including the current COVID-19 crisis, the stock market has undergone four corrections^* since the financial crisis in 2007-2009. Every time wine has maintained stable prices, been subject to tiny drops and even nice increases in value. In this light, there are no historical facts to conclude that the price of wine drops when the stock market is in crisis. If they drop, it is only for a temporary and limited time.

This means the wine investor will enjoy stable and solid returns during the good times and strong capital-preserving properties during crises, corrections, and even recession.

*A correction of the stock market is defined by a sudden decrease of the value of more than 10%

Read about how COVID-19 is affecting the wine market

Quality

RareWine Invest’s Wine Detective Safeguards Your Investment

In line with rising wine prices, and the price of the most expensive bottles has far exceeded € 30.000, the incentive to produce counterfeit wine also increases. Producing fake wines is a relatively new fact of life, and as the largest provider of investment wines in Scandinavia, we take this problem very seriously. All wines traded through RareWine Invest are checked by our wine detective, who, in connection with this work has built one of the world’s most extensive image archives of rare and expensive wines. Today, the archive contains more than 100,000 high-resolution images of genuine and counterfeit wines, ensuring your investment against counterfeits.

Wine detective Mads Pedersen works solely with quality assurance and anti-fraud at RareWine. In close collaboration with wine producers and auction houses, he works every day to make the world of wine a safer place.

Mads Pedersen is among Europe’s most skilled in his profession today, and his anti-fraud work is internationally renowned.

Return On Investment

14 Good Wine Investments

Over time, the return on wine investments has justified using the term investment wine. Numerous examples of wines with rising prices have been good investments, and from a broader perspective, wine has historically outperformed the global stock market.

The stock market is said to be effective, and share prices rise and fall daily in line with new information becoming available and the changing mood of the market.

Thus, the stock market is sometimes very volatile, resulting in increased risk.

Wine is much more stable as an investment.

There are far fewer events that affect wine prices to move, and the number of events resulting in falling prices is limited.

Instead, prices increase steadily at a steady pace in line with growing demand and the continuous consumption that reduces the supply.

The wines below are examples from existing, actual portfolios.

The investors have purchased the wines through RareWine Invest based on RareWine Invest’s recommendations.

Valuation prices correspond to the sales price of wines on the global market and have been communicated to the investors via My RareWine Invest.

In 2015, the American business magazine Forbes focused on wine investments and compared wine with stocks.

It compared a portfolio of various investment wines with the market index S&P 500 over 20 years. The outcome was that investment wines had provided twice the return on investment compared to stocks from 1993-2013.

Wine	Purchased	Valuation	Returns
2007 d'Auvenay Auxey Duresses Blanc Burgundy	€750 Oct 2019	€2.000 Jun 2021	167% 80% Annual
2012 Coche-Dury Corton-Charlemagne Blanc Burgundy	€1.760 Jan 2020	€3.300 Mar 2021	88% 71% Annual
2013 Domaine Leroy Romanée St. Vivant Burgundy	€1.950 Jan 2017	€6.750 Jun 2021	246% 32% Annual
2009 Comte Liger-Belair La Romanée Burgundy	€2.590 Jan 2019	€4.500 Feb 2021	74% 30% Annual
2013 Domaine Leroy Richebourg Burgundy	€2.250 Jan 2017	€7.500 Jun 2021	233% 31% Annual
2001 Armand Rousseau Gevrey-Chambertin Clos St. Jacques Burgundy	€430 Jan 2016	€925 Jun 2021	115% 15% Annual
2000 Pol Roger Sir Winston Churchill Champagne	€100 Jan 2017	€170 Apr 2021	70% 13% Annual
2002 Salon Cuvée "S" Champagne	€450 Jul 2019	€750 Jul 2021	67% 34% Annual
1996 Dom Pérignon Champagne	€220 Jan 2019	€360 May 2021	64% 23% Annual
1998 Krug Vintage Champagne	€130 Jan 2017	€265 Apr 2021	104% 18% Annual
2015 Margaux Bordeaux	€610 Oct 2017	€900 Apr 2021	48% 12% Annual
2016 Tignanello Italy	€59 Apr 2019	€110 Jun 2021	86% 33% Annual
2015 Sassicaia Italy	€130 Oct 2018	€210 Mar 2021	62% 22% Annual
Brora 38YO 16th release 1977 Whisky	€995 Oct 2017	€1.650 May 2021	66% 15% Annual

I consider wine investment to be a supplement to other investments. Historically, we have seen fine returns on investments in wine, which I find appealing. Finally, it is also good fun to be able to invest in an area that I’m really interested in.

Johnny V. Jensen

Aalborg

Investment Guide

Get RareWine Invest’s Guide To Investing in Wine

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Why Wine Is The Perfect Investment