This year, high-income families are forecast to place 22% of their assets in alternative investments, according to Capgemini and Merrill Lynch, up from 10% in 2002. And that includes wine.
Experts say the appeal is both monetary and emotional. "Psychologically, you don't get that attached to bonds and shares," says Mahesh Kumar, author of Wine Investment for Portfolio Diversification. "But a 1982 Chateau Margaux -- people take pride in that." Plus, he adds, "it's got sex appeal. It's snobbish."
If wine is your passion, consider these investment tips.
First, choose wine with impeccable quality. What does thatmean, exactly? According to Kumar, quality equals investment-grade vintages like Bordeaux, Burgundy and Tuscany whose wines typically offer longevity and liquidity. "These wines can last up to 200 years ... and someone out there will always want a first- or second-growth Bordeaux wine," Kumar says. Prices can begin as low as $5,000 for a few bottles, and go up to $5 million. Profits are generally 15% over a 20-year period, says Kumar, whose own collection of wine has grown nearly 60% in value in the last three years.Next, consider the provenance of the wine, or its history. Ask the following: Where was the wine made? Who was its first owner? What is the condition of the case? Where was it kept? If you're buying the wine from an auction house, there should always be a detailed log of its history provided. "If a case of wine does not have one of these provenance books, don't buy it," Kumar stresses.
Still another route is wine-investment funds, which are mainly based overseas. The diversification eases risk, but the funds typically charge heavy fees. They also require a minimum investment, usually in the tens of thousands of dollars.
And remember, if the investment goes bad, the least you can do is enjoy the wine. "Ultimately, it is a drink," says Kumar.