Passion or Pecuniary – What Leads People to Invest in Wine?
People are not advised to invest in anything they can’t understand, because lack of knowledge in a certain industry doesn’t bring them money. Wine aficionados must have a thorough understanding of the wine trading business if they want to invest.
Why should you be compelled to “drink up” your investment because you made a mistake when you can get it right the first time and make a profit?
However, things are not that simple. For generation, the pure nature of investing in wine has been separated into two main concepts: money and love, each of these two aspects appealing to different kinds of people.
Pecuniary vs. passion
For the avid collector, the passion for wine has always been a primary reason to buy more wine cases than one can personally consume in a lifetime.
Those eager to make a profit have an eye from brokerage and have the skills to trade wine as any other product as a global commodity. Recently however, many things have changed and collectors now embrace both concepts as far as investing in wine is concerned.
Wine investing most likely began with the financial aspect in mind. Many powerful chateau owners of the 19th century were once avid merchants.
In the 1890s England, wealthy families invested in wine for a very different purposes: they wanted to give future generation a special drink to consume.
Nowadays, most wine aficionados begin an investing because they’re mainly passionate about fine wine. They invest in a case of wine that appeals to their sense, and then try others. Before they realize it, they end up with dozens of wine cases just waiting to mature in their basements.
The purchase-now and drink-later strategy is called a pleasurable investment. In the future, after the wine has matured, a collector turned investor begins to discover that there’s more financial value to fine wine than meets the eye.
It all started with Bordeaux
When wine aficionados began investing in Bordeaux futures, nearly 40 years ago, the goal was not necessarily to make a profit but to save cash by investing in the least expensive type of wine. In the last 20 years or so, many things have changed.
An increasing number of avid collectors have started shifting their focus over the way investments were done in the wine industry. They’ve started paying more attention to the potential profit aspect of fine wine. How did they manage to do it?
First, they turned their attention to wine auctions, where they could easily trade their existing wine cases. Soon enough, wealthy collectors realized that people were coming from all corners of the country only to buy their wine; and they were willing to pay the big bucks. In the 21st century, many factories emerged and they were the ones to treat wine as a serious financial investment.
The rise of exchange platforms like Liv-ex – an electronic b2b trading platform created in 1999 by two ex-stockbrokers – led to an even bigger interest in wine as a profitable type of investment.
Together with Liv-ex, the wine industry saw an increase in wine funds; the sole purpose of a wine investment fund was to buy wine in massive quantities, and the main focus was top Bordeaux because Bordeaux wine had a proven track record.
Many people invest in wine for the sake of investing to diversify their portfolios. Others actually see that there’s great potential in this industry. However, it’s not advised to enter the wine market unprepared.
For your initial investment to pay off, you need to understand how the industry works; know the history of investing in wine, and have a general understand of the actual product – taste, smell, and investment potential.
Category: Wine Investing
