Fine Wine as an Alternative to Bonds
What about fine wine as a bond alternative? Investment-grade wine is in a correction in 2023. Will investment-grade wine do better than the 5% you expect from bonds?
Wine an Investment
Generally, wine and wives get better with age. Both become scarcer over time. Wine because people consume it, and wives because they do.
But consider this: if something improves yet becomes scarcer over time, it seems like a good investment. With investment-grade wine, the goal is to buy low and sell high. Prices are down in 2023, so now is the time to think about the expected future returns of wine as an investment.
Investment-grade wine can be purchased and stored to be later sold for others’ consumption. There is a thriving marketplace for investment-grade wine and several options for wine investing.
Why Invest In Wines?
What about wine as a bond alternative? Seek diversification and non-correlation with the stock market, especially when considering a bond alternative. Wine has a 12-20% annualized return over the decades and is not correlated with the stock market.
When the market crashes, fewer rich people buy wine. Wine is subject to cycles. Nevertheless, prices increase over the long term as wine is consumed. And honestly, the rich recover sooner after cycles and have plenty to spend on good wine, even during economic downturns.
Why invest in wine? Wine is a bond alternative that offers better returns over the next 10 years. What are 10-year treasuries paying? What is the expected return on investment-grade wine over the next 10 years? If you don’t need the liquidity and want diversification, it is a consideration.
What about 1-5% of your bond portfolio in aged crushed grapes? How sweet is that?
How to Invest in Wine
I use Vinovest to invest a small percentage of my bond money in fine wine. I first invested in 2019 and have seen good appreciation, though I recently felt the correction.
Vinovest is an online platform and a one-stop shop for wine and whiskey investing. They research, authenticate, buy, and store wine or whiskey for you. What they buy depends on your risk profile and how long you can keep illiquid. After purchase, your investment is stored in professional storage facilities, and they insure it. Vinovest also provides a secondary marketplace, so your investment is liquid.
But do you need the money? Investing in fine wine means drinking or selling it in 10 years. Your wine is illiquid, and a bond alternative you expect will do better than the risk-free rate.
