Investing in Wine: Returning 522%, Some Wines Are Outpacing Stocks

By Dr. Steve Sjuggerud, President, Investment U
Thursday, February 12, 2004: Issue #312

“Let’s face it, in a worst-case scenario, you can literally drink your investment into oblivion” – Eric Roseman

If you’ve never given thought to investing in wine, just look at a recent issue of Global Mutual Fund Investor. My friend Eric Roseman points out that First Growth Bordeaux wine (1990 vintage) has risen by 522% over the last 10 years, beating out stocks. Up 522% in the last 10 years!

Roseman says, “Some of the world’s finer vintages have severely outpaced the S&P 500 Index – especially from 2000 to 2002 when the American broader market crashed 40%. Wine truly has no correlation whatsoever to the S&P 500 Index and offers key asset allocation diversification as an investment“

According to Forbes.com: “The world’s most expensive bottle of wine that could actually be drunk today is also the most expensive wine ever sold in America, a Montrachet 1978 from Domaine de la Romanée-Conti that was hammered down at Sotheby’s in New York in 2001. The lot of seven bottles fetched $167,500, or $23,929 per bottle.”

The NYSE of the Wine Investing World

The wine investing market is actually developing into a “pseudo stock exchange” for finer vintages, Roseman says. For example, “The WorldWineXchange.com offers secure trading in fine wine to international buyers and sellers on a real-time, first-come, first-served basis.”

Whether it’s a joke or it’s serious, there’s actually a wine price “ticker” running across the bottom of the web page.

The wine investors themselves don’t see wine investing as a joke at all They see a supply of fine wines from good years constantly shrinking pushing prices ever higher. It’s Economics 101, they say – supply is falling while demand is increasing.

If you’re into wines, you may get a kick out of a few web sites that are out there:

• The site www.decanter.com offers its Fine Wine Tracker, which allows you to chart wine prices just like stock prices, going back to 1978.
• The site www.InvestDrinks.org points out some of the big risks and pitfalls.
• www.brentwoodwine.com/wineinvesting.html offers the positive case.
• And there’s even an offshore fund: www.vintagewinefund.com

Although I’m no wine expert, I found these sites interesting.

Robert Parker’s newsletter is popular, as well, as a high rating from him will almost guarantee high demand for a wine. But I’m getting out of my area of expertise here.

Honestly, I know nothing about wine – I’m not joking. But I got a kick out of my friend’s article about wine as an investing strategy. In particular, I liked Eric’s view about the upside of the downside

“Let’s face it, in a worst-case scenario, you can literally drink your investment into oblivion!”

Good investing (or, if it doesn’t work out, drowning your sorrows),

Steve

Comments

By submitting your comment you agree to adhere to our Comment Policy and Privacy Policy.

Check out our selection of daily investment research: