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Wine is a good investment. For those that like to diversify their portfolios; here’s a little information that may make you think twice about portfolio diversification. Bloomberg News reported that top quality wines have outperformed the Russell 3000 Index (a small cap index) for the last 13 years. Two top Swiss economists compared top quality wine prices with the Russell over a 13 year period and it was the wine that won. The period experienced both bull and bear markets.
The conclusion by other wine collectors is that great quality wines are scarce and not to be gotten everywhere. Recently, investors have been seeking alternative investments such as art and wine; hard assets similar to gold and oil, which have both rallied.
Vintages from 1981 to 2005 were used in the study. The high quality wine index using first growth wines hugely outperformed and had a more than fivefold return while the regular wine index more than doubled. The Russell 3000 gained about 50 percent.
Wine investments are not for everyone because it is not widely traded and you have to be prepared for proper storage and handling. It’s a truly speculative investment betting on what people will pay for the wines in the future. Not all wines will appreciate at the same rates. Choice wines like the Petrus or top Burgundies will appreciate at a faster rate. The increase in prices may have coincided with the fact that global consumption of wine has increased and investors are looking for other assets for investments besides the usual stocks and bonds.
For more information on the Fine Wine Index view here.
Cheers and Tweets!
– Adrienne, PIWC