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Welcome to the first edition of The Alt Investor. Powered by Money Armada, The Alt Investor will be your best source of alternative investing news and data. The world of alternative investing is extremely diverse- everything from Wine, Whiskey, Real Estate, Farmland, Timberland, and even Franchise investing falls under this umbrella.
The Alt Investor will keep you informed on all of the above categories so you can be fully informed on these emerging asset classes.
This week’s newsletter will focus on rare wine and whiskey investing, and how to add them to your portfolio.
The Potential Returns of Wine Investing
Wine investing is gaining popularity as investors look for positive returns outside of traditional markets. There are many different pricing factors when it comes to investing in wine- from age to region to the type of grape used.
In the past, wine investing was not very liquid (pun intended). It required holding bottles and selling them at marketplaces. However new online platforms are making wine investing as easy as stock investing.
That being said, what are the actual returns of investing in fine wine?
2022 was a turbulent year for investing. With interest rates rising, stock and bond values plummeted. Finding a positive return (net of inflation) became more difficult.
Meanwhile, wine investing flourished. During 2022, fine wine investing was up over 20% over the previous 12 months. Meanwhile, the S&P 500 fell about 18%, and the NASDAQ over 30%. With many stocks continuing to struggle, and a banking crisis threatening the Federal Reserve’s mission of stopping inflation, wine might be the safe haven you’ve been looking for.Return on rare wines vs major indices. Source: Cult Wines
Why is wine appreciating considerably more in value compared to other assets, especially gold? For one, people are flocking to “real” assets- i.e. assets you can physically touch- due to market volatility. This is common in times of economic uncertainty, and wine values continue to benefit from this rule.
Additionally, the demand to invest in wine is increasing as it becomes easier to invest in wines due to online platforms. Many investors are seeing the benefits of adding a real asset, such as wine, to their portfolio.
Why Wine is Valuable
It can be daunting when beginning to build a portfolio in rare wine. First, you have to understand the main components of what makes a wine valuable:
- Vintage wines are made in a limited number, which immediately puts a floor on the value of the wine.
- Worldwide Consumption
- As the world drinks wine, it eats into the supply of the rare vintages all over the globe. When supply decreases, the value of the wine goes up.
- Brand Value
- Certain brands of wine are well-known for their quality and rarity, thus more valuable.
- Wine only gets better with age. Opening an old wine bottle is considered a luxury, and investing in wine early in the aging process is a common investment strategy.
- Different regions produce different kinds of wine. Spanish wine is different from French wine, which is different from US wine. A wine’s origin directly affects its current price, as well as its future outlook.
Each vintage and type of wine is going to have a different return based on tastes and interest across the globe. When investing in wine, it is important to consider both regional and global economic factors.
Investment Wine Classifications
While there are hundreds of different wine classifications, there are typically just a few types of wines that are considered “investing wines”. Below are the most popular categories that major wine investors buy bottles in. Note that prices are estimates based on an average of multiple auctions and years of that particular wine.
Bordeaux red wines have one of the most established secondary markets of all fine wines, and consistently are known for their quality and aging potential. This classification of wine is from Bordeaux, France, and broken into two categories: “left-bank” and “right-bank”, based on which side of the Garonne river the wine was made. Some famous investment wines include:
While not as common for investing as Bordeaux, Burgundy wine commands some of the highest prices for wine. Both the red and white varieties of Burgundy is extremely valuable and can make great additions to your wine portfolio. Some examples of Burgundy wine are:
- Henri Jayer Richebourg Grand Cru– Avg price: $29,173 / 750 ml
- Coche-Dury Corton-Charlemagne Grand Cru– Avg price: $7,430 / 750 ml
Wines from the Rhone Valley are not as pricey as Bordeaux or Burgundy, but can still be an attractive investment wine. This region sits in southern France, and is home to some very famous wineries and vintages. Rhone Valley wines that have investment potential include:
- Chateau de Beaucastel Chateauneuf-du-Pape Grand Cuvee Hommage a Jacques Perrin– Avg price: $377 / 750 ml
- Chateau Rayas Chateauneuf-du-Pape Reserve Blanc– Avg price: $978/ 750 ml
Italy is another country famous for its wine, though it does not command as high of prices as France. Tuscany has some of the most famous wines, but there are many regions of the Mediterranean country that produce great wine that is loved across the world.
- Tenuta San Guido Sassicaia Bolgheri– Avg price: $366 / 750 ml
- Marchesi Antinori Solaia Toscana IGT– Avg price: $386 / 750 ml
The United States is the leader in what is considered “The New World” in the wine industry. Other countries include Australia, Chile, Argentina, South Africa, and New Zealand, however only Australia and the US are “New World” countries that produce wine that is reliable for investing. All of the US investment wines come from California, however they are not traded nearly as much as French wines. Some top vintages include:
- Screaming Eagle Cabernet Sauvignon– Avg price: $4,611 / 750 ml
- Schrader Cellars ‘Old Sparky’– Avg price: $1,061 / 750 ml
Investing in Wine
As you can see, there are a number of different investment strategies you can take when beginning to build your portfolio of investment wine. Perhaps you want to focus on the Bordeaux region- a wine with a reliable secondary market and proven investment focus. Or perhaps you want use American wine as an “Emerging Market” type investment, and bet on the growing popularity of California’s wine culture.
To get started, you can open a VinoVest account with the minimum investment of only $1,000.
Whiskey Investing Return
Similar to wine, rare whiskey is an ages old collector’s item that is starting to show real return potential. The value of whiskey casks is uncorrelated with market trends, making it another great hedge to a traditional portfolio.
How does whiskey investing fair vs wine investing? Below is the index of Rare Whiskey 101’s top 100 whiskeys in the world.Source: Rare Whiskey 101RW Icon 100 Performance summary
Since its inception in 2013, this index is up over 329% as of Feb 2023. Long-term, this beats the S&P 500’s 10 year return of 162%.
On the short-term, whiskey is more volatile than wine. Year to date the index is down 1.78%, which is worse than the S&P’s current YTD of just over 2%. However, this whiskey index is limiting losses over the past 12 months to just 7.70%, while the S&P is down over 10% the last 12 months.
Overall, with economic uncertainty diversifying your portfolio with rare casks of whiskey could help limit losses and potentially elevate returns.
How to Invest in Whiskey Casks
Similar to wine, VinoVest has launched WhiskeyVest, a new platform to begin investing in casks of whiskey.
Something to note is that while wine investing online offers the flexibility of buying by the bottle, whiskey investing online often requires buying entire casks from distilleries.
We have written a guide on the various ways you can invest in whiskey, and there are many platforms you can use in order to invest. Of course, you can simply buy bottles of whiskey and hold on to them- however, once a whiskey is bottled it stops aging. This is a key component to the value of the whiskey, and it is why many opt to buy casks to allow the aging process to continue.
Different Types of Whiskey
Whiskey, like wine, is broken down into different categories that are dependent on where its made and the distilling process. These are:
- Scotch – Scotland
- Bourbon – USA (Kentucky, specifically)
- Irish Whiskey
- Canadian Whiskey
- Japanese Whiskey
Different types of whiskeys have different flavor profiles and rarities, thus increasing their value.
Diversify Your Portfolio with Wine and Whiskey
Wine and whiskey are both great investment options, especially in an uncertain market. However, like everything else, diversification is key. Wine and Whiskey should only make up a portion of your portfolio.
It can be hard to find different assets that are not correlated, however thanks to new technology, many different types of assets are now available to the public.
We will be sharing more information on other alternative investments, such as Farmland, Timberland, and Franchise shares in future newsletters. In the meantime, check out MoneyArmada.com for the best guides and resources on the newest alternative investments and guides.
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Some or all of the products featured here are from partners who compensate us. These partnerships may influence which topics or products we cover but do not influence our reviews. Money Armada is an independent publisher. Not investment advice.