HOW TO INVEST IN WINE
Firstly – You do not need to have much knowledge in the subject – if you choose the right trading partner such as Twaites and Jones, then you should leave this to them. Not all wines are suitable for investment; in fact the kaleidoscope of wines for investment is narrow. Only a handful of countries produce wines that are considered ‘Investment Grade’, and the same goes for the ‘brands’ for which carry adequate consumer demand.
Secondly – The time horizon for investing in wine should be set for a mid-long term holding period. Generally the longer you can hold your wine the more it will appreciate in value.
Thirdly – and certainly the most important point here – RESEARCH- RESEARCH – RESEARCH! -TODAY WE LIVE IN THE AGE OF TECHNOLOGY AND INFORMATION – SO USE IT!
HOW TO INVEST IN WINE CHECKLIST – Here are some useful tips to ensure you have found the right trading partner:
- What do you know about the business? Do they have a good reputation? Did you find them – or did they find you? (If the latter is the case – were you cold-called by them?) If it is possible then arrange to meet with them at their premises!
- Do they follow the correct procedure and formalities for ‘Distance Selling’?
- Check the prices of the wines being offered, but most importantly can they provide proof of the condition and provenance of the wines they are trying to sell? – Use websites such as Wine-Searcher, sign up to ‘Cellar-Tracker’ – a useful tool to monitor market conditions
- What are the company’s margins when selling to you and buying back from you? Do they offer ‘transparency’ with valuations?
- Sales pressure – wine should never be a ‘hard sell’ and ‘urgency’ should always be treated with caution
It is important to advise that (currently) the Wine Investment market is NOT regulated by the FCA (Financial Conduct Authority) in the UK. There is in fact no controlling body in place in the UK to protect wine investors. Despite the lack of regulation there are excellent INDEPENDENT ports of call that will help the investor discover the right steps to follow and ensure that they do not fall foul of the many questionable companies that seem to prey on the unwary. At Twaites & Jones Ltd we acknowledge this and promote all INDEPENDENT bodiesthat help prospective investors as well as those who already invest, to follow the essential advice that is available to them. Please go to our Fine Wine Investment Scams page for information on how to avoid such activity.
YOU CAN FIND FURTHER ‘INDEPENDENT’ ADVICE – INCLUDING RELEVANT LINKS ON ‘OUR FINE INVESTMENT SCAMS’ PAGE
BELOW ARE THE TRADITIONAL ROUTES FOR INVESTING IN WINE
The Merchant – There are many Merchants that offer ‘Investment’ services. Whilst this route is often perceived as a safe route – you may incur ‘service’ charges such as management fees (typically 6% per year). Of course there is the ‘spread’ (typically 15-20%) to include as well. However, the most important factor to understand is that like any merchant for any product – they are bound to their suppliers. With this in mind, they are committed to selling the stock they hold. This means that you will often be buying wines that they must sell due this commitment. This severely limits your options and ability to diversify.
Wine Funds – Over the past 10 years or so, there have been various Funds available to the individual investor. They are sophisticated and follow the path of ‘City’ Fund managers who have delved into various commodities to create a product for the ‘modern-day’ investor. Again, there are certain ‘Fees’ to be aware of; Management fees, Admin fees, Profit share – All will eat into your own profits. Normally there is a minimum investment of £10,000 – and you will NOT be buying wine that belongs solely to you. Your monies are normally ‘locked in’ for a specified time. The ‘Pros’ and ‘Cons’ here are obvious, however the important point to make here is that like many products of this nature you will ‘tied-in’ and committed for the length of the Fund and any early exit will incur further fees.
The Broker – The main role for a broker is to source the very best price for either purchase or sale – so your entrance and exit points are usually the most attractive as an investor. Generally, the broker buys and sells (with tight margins) – but this is the main activity for the business.The broker will have access to most stock through their networks and make available to the investor, but key decisions are left to the investor alone unless of course a management fee is charged.