Opinion

Felix Salmon

Do expert wine investors make more money?

By Felix Salmon
June 11, 2009

As every financial journalist knows, if you talk to self-proclaimed experts at investing in some given asset class, those experts will always tell you that what you really need, if you want to invest in their asset class, is expertise. This is not helpful. But Brett Arends seems to have bought it, at least when it comes to wine:

You really need to know what you are doing. That’s true of any market, but probably more in wines, where expertise can be developed over decades, than in many others. The really smart money in the wine market is going to cream the dumb money.

The odd thing about this is that if any market has seen the dumb money cream the smart money, it’s the wine market.

By far the best-performing wines have been the big brand-name first-growth Bordeaux: Petrus, Lafite, Margaux, that sort of thing, especially from renowned vintages. Meanwhile, anybody trying to snap up undervalued wines or otherwise make some kind of relative-value play will have massively underperformed. Those fabulous wines from the south of France or Australia or Germany or Italy or Spain? That case of 1945 port? Your bottle of 1899 madeira? None of it has performed particularly well as an investment. And it turns out that the cult California cabernets can be rather more difficult to sell than you might think — assuming you were able to buy them in the first place.

Now there are good reasons not to buy wine as an investment, and Arends covers most of them. But if you are going to buy wine as an investment, it’s not at all obvious that expertise is going to help you.

Comments
4 comments so far | RSS Comments RSS

That reminds me, when I was in Miami, I think I saw something you wrote for some Latin American business magazine about wine. Good article.

 

You’re right Felix. I was going to say it’s a lot like Keynes’s mythical beauty contest, except that figuring which babe was most likely to stimulate a bunch of horny old newspaper reporters probably did take some smarts. With wine investing, the only judge you have to consider is Parker, who publishes exact scores well in advance of the IPO. Hint to investors: look for 3 digits.

Posted by maynardGkeynes | Report as abusive
 

Wine, like any investments, have a risk. Weigh your pros and cons before investing.

Learn more about wine investment here at http://WineInvestment.sg

 

Even assuming you do own or can rent the necessary fine wine market knowledge, except in inflationary environments, on a risk-return scale, fine wine as an investment class is not appealing, nor is it liquid.

Neverthless, it could be an attractive and diversifying component in stock and bond portfolios, and during an expected, protracted inflationary period likely ahead, worth consideration.

Luis de Agustin

Posted by Luis de Agustin | Report as abusive
 

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