Kevin Baumgartner, a young investor with his interesting passion. Despite inexperienced age, because he is 16 years old, he is doing very well in investing in wine. He can embarrass many young people with his knowledge and a mature view of the world.
Every year investments in alcohol gain a growing number of supporters. Particularly because they are relatively resistant to market fluctuations compared to other alternative investments. However, to invest your money well, you need to know some of the rules governing the alcohol market.
We are increasingly looking for alternatives to bank deposits or investment funds. We are reaching for new ways of investing money that will allow to supplement the portfolio with assets positively affecting risk diversification. That is why many people are inclined to emotional investments, the value of which is usually independent of events on the stock markets, bank decisions or economic trends. Purchases of works of art or classic cars are now commonplace, however, they involve the need to have significant financial outlays. There are also other investments that are less demanding in terms of the portfolio – whiskey and wine.
Wine banking, or investing in wine is a service based on the experience of the international wine exchange operating in London since 1999. It allows trading in sophisticated brands whose prices are recorded in a continuous system. It is the equivalent of elite blue chip indexes that can be found on every major trading floor. Changes in historical rates of return are best reflected in the growth of the The Liv-ex 100 broad index, which has increased by over 150% in the last 3 years, which in the best cases translates into several hundred percent changes in the prices of individual wines.
The advantage of Wine Banking is the fact that it is relatively independent of external macroeconomic factors, because it ripens according to wine laws that have not changed for centuries. When investing in wine, however, you must take into account financial risk. It can be associated with both the wine market and the general situation in the world. Wine prices do not always go up – sometimes they fall and it may happen at the most inopportune moment, e.g. when the investor wants to close the investment.
However, unlike securities or investment fund shares, wine exists in physical form. While the stock market is bearish and stock prices are falling, wine can maintain its value. Crises, wars and hyperinflation will not destroy it either. The market price of wine is determined by the following features:
2. Production volume,
3. Place of origin and producer,
Wines worth investing in
For most novice investors, the wine market and the classifications that govern it are incomprehensible – their multitude can cause many problems to people who have not had contact with them before. In the vast majority of cases, vineyard classifications relate to consumer wines, which can be divided into many different aspects such as color, region of production, quality, clarity and flavor. In the case of collector wines, only some prestigious brands from French regions such as Bordeaux-Medoc, Sain-Emillion and some Burgundy wines, which belong to the Premier Cru classification from 1855, constitute a certain investment. The London Lin-ex platform, which is the largest wine exchange in the world, annually reports a significant increase in premium prices. Last year, the largest price increase was recorded by Grand Échézeaux, which almost doubled in 12 months: it gained 96% of the initial price. Although this is a unique example of a wine that has significantly increased in value, it is estimated that on average Bordeaux wines need up to five years to gain 100% value.
Although the wine market is quite stable and experts suggest that in the next years it will be one of the most profitable alternative investment markets, for most people the amounts achieved by good collector brand wines are unattainable: after all, investing in one bottle can take up tens of thousands zlotys. Vineyards, however, usually release a small amount of premium class wines, the production of which is limited by a strict classification system, paying attention not only to the grape strain or soil on which they grow but even to the way fruit is harvested. The vast majority of production is “second class” wines that reach a value even several times lower than the flagship, most expensive wines. Although the price of such wines does not rise at such a pace as the value of premium wines, they are an equally good and stable investment, supported by Asian collectors who, in order not to strain their portfolio, are looking for wines with a lower price and an exclusive label.
Don’t forget and watch the interview with Kevin