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September: let’s get back to work with a fresh start!
If you’re reading this, chances are you're passionate about more than just wine or investments—you’re interested in the intersection of both. Whether you're a wine expert without much financial background or someone well-versed in investing but new to fine wine, this is for you.
As our community grows, it’s important that we all stay on the same page when it comes to understanding fine wine as an investment. To help with that, I’d love for you to identify where you are on your personal investing journey. This will ensure we cater to everyone's needs and experience levels.
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In this article, you’ll find a comprehensive guide on fine wine investing, designed for both beginners and experienced investors alike. The guide is as practical as possible, offering actionable steps to help you either start or refine your fine wine investment journey. It covers everything from understanding the basics to incorporating fine wine into a diversified investment portfolio.
All the information you need to start investing in fine wine is freely available in this article. The guide includes the key steps, strategies, and insights to get you going on the right foot.
Alongside this free course, I’ve also created a Google Sheet, available behind a paywall (scroll to the end of the article). It is an optional tool that simplifies the process by organising all the essential data, metrics, and models you’ll need to streamline your investment decisions. It’s not a necessity, but if you’d like to make things easier, or if you’d like to support my work, this is a way to do so.
The main goal is to keep my content free and accessible to all, while offering something extra for those who want it.
Now, while some steps of this course may seem obvious to the more experienced among you, it’s crucial not to overlook fine wine within the context of your broader investment portfolio.
In fact, one of the most common behavioural biases in personal finance is mental accounting. This occurs when we assign different values or levels of importance to money based on its source or intended use. For instance, we may treat a salary differently from a bonus or inheritance, even though the financial principles governing both should be the same. When it comes to investing, this bias can lead to suboptimal decisions by isolating pots of money rather than considering the full picture.
The key takeaway?
Fine wine investments should be viewed holistically as part of your overall portfolio strategy. It’s not just about owning a few prized bottles; it’s about understanding where wine fits in terms of risk and return, alongside your other assets.
This course helps you with that.
Let’s dive in!
Eight Steps To Invest In Fine Wine
I’ve broken this course into three parts, to be delivered over the next month.
Today, we’ll look at the first three steps. After completing these, you’ll have a clear understanding of how much you can or should invest in fine wine (if you choose to), without compromising your financial well-being.
In two weeks, we’ll focus on the practicalities of investing in fine wine—exploring wine merchants and other platforms, storage options, and your level of involvement in decision-making.
The final session will centre on selecting wines you enjoy, at the right price, while also giving you insights into the lifecycle of fine wine releases.
Step 1: Set Clear Investment Goals What are your goals in fine wine investing? Without a clear goal, you may end up buying wines without direction. While this could be fun for some, it’s not ideal if you want to treat fine wine as part of your investment portfolio. Define your objectives—whether you’re looking for long-term returns, portfolio diversification, or the enjoyment of owning valuable bottles.
Step 2: Determine How Much You Can Afford To Invest Before you dive in, it’s essential to assess your income and wealth to understand how much you can safely allocate to fine wine. You may need to start small or, alternatively, have the means to invest a significant sum. In either case, it’s important to know how this amount fits into your overall portfolio and financial strategy.
Step 3: Determine Your Tolerance for Risk Risk tolerance goes beyond just how much you’re willing to lose. It also involves considering your time horizon, experience, and overall financial situation. Some fine wines may take years to appreciate in value, so you’ll need to be comfortable with the level of risk and the potential for illiquidity over the short term.
Coming Up in Two Weeks:
Step 4: Determine Your Investment Style Explore whether you prefer a hands-on approach or a more passive strategy in your wine investments.
Step 5: Choose an Investment Platform From traditional wine merchants to online platforms, this step will guide you through the selection of the best platform for your needs.
Step 6: Fund Your Investment Account Once you’ve chosen your platform, we’ll cover how to fund your account and manage your initial investment.
In One Month:
Step 7: Pick Your Wines & Understand the Release Lifecycle We’ll dive into the art of choosing wines, how to select wines that not only align with your personal tastes but are also priced right from an investment perspective. Knowing where to find reliable pricing information, and navigating the lifecycle of fine wine releases are key aspects of fine wine investing.
Step 8: Learn, Monitor, Review The final step will focus on continuously monitoring market trends, and reviewing your investment decisions to refine your investment strategy over time.
Now, we begin…
Step 1: Set Clear Investment Goals
You need to write your goals.
I repeat: you need to write your goals.
This step is more important—and harder—than you might think. Many people assume they can simply go with the flow, but unless you have vast resources, that’s not a sound strategy. (To be honest, it’s not a sound strategy even if you are rich.) Clear goals will guide your investment decisions and help you stay focused on what matters most to you.
(I’m starting to sound like my accountant here!)
To do now:
Specify your goals, financial and non-financial. Fine wine is a passion asset, so it’s crucial to think about both monetary and non-monetary objectives. Take a “stream of consciousness” approach and write down whatever comes to mind, whether it’s financial success or personal enjoyment.
E.g.: "I want to taste Le Pin 1989 before I die.", "I want a collection of every vintage Dom Pérignon going back to 1921.", "I want to buy cases of 12 of wines I like and make enough profit on 6 to cover me drinking the other 6."
Determine your investment horizon. Think about both short-term and long-term goals, as these will affect your strategy. For example, longer time horizons can allow for a more aggressive approach, whereas shorter-term objectives may require a more conservative stance. Now that you’ve got a list of your goals, divide them into:
Short-term (1 to 3 years)
Medium-term (5 years)
Long-term (10+ years)
When doing this, take your age and time to retirement into account.
For instance, a short-term goal might be to buy a diverse collection of 10 Nebbiolo-based wines, while a long-term goal could involve building a legacy collection of all vintages of G. Conterno.
Rank your goals. Now that you’ve written your goals, it’s time to prioritise. Which ones are the most urgent? Which ones are the most important? Consider whether building a significant collection is a higher priority than making smaller acquisitions or focusing on wines that bring personal joy versus potential financial return.
Adapt as life changes. Your goals will likely evolve over time, so it’s essential to review them regularly—annually, at least. Life circumstances change, and so should your investment plan. By doing a yearly review, you can ensure your strategy stays relevant to your current situation.
Step 2: Determine How Much You Can Afford To Invest
One of the most common questions I get when I tell people I write about fine wine investing is: “How much do I need to start?” While it’s possible to begin with something like a case of 6 bottles of Vajra’s Barolo Coste di Rose for under £300, that’s not the main point.
The more relevant question to ask is: “How much can I afford to invest based on my wealth and income?”
Pinpointing how much you can afford to invest in fine wine requires a clear-eyed assessment of your financial situation. Investing in fine wine can be a valuable part of a diversified portfolio, but only if done responsibly.
To help with this, I’ve created a Google Sheet (scroll till the end) that will allow you to calculate your net worth, income, and determine your target allocation for fine wine investments. It’s behind a paywall for a simple reason: creating and maintaining this tool takes significant time and resources, but its purpose is to simplify your decision-making process and ensure you’re investing responsibly.
The Google Sheet helps you:
Calculate your current net worth and income
Assess what the best target allocation range for fine wine should be, considering your other investments (property, pension, stocks, bonds, and cash reserves)
However, you don’t need the Google Sheet to get started! You can follow the steps below and work it out yourself manually:
To do now:
Calculate Your Total Net Worth. Your total net worth is calculated by subtracting your liabilities (like mortgages or loans) from your assets (cash, real estate, stocks, bonds, pensions, etc.).
Total Assets (Cash, Real Estate, Stocks, Bonds, Pension ...) - Total Liabilities (Mortgage, Car Loan, ...)
Calculate Your Income And Assess Its Stability. Determine your total income, which can include: Salary, Dividends, Coupons from Bonds, Rental income, Other income sources. Also, consider how stable these sources of income are. Is your salary consistent, or are dividends and rental income variable?
Total Income = Main Salary, Dividends, Coupons on Bonds, Rental Income, Other ...
Ensure Financial Stability Before Investing. Before diving into any investments (not just fine wine), ensure that you:
Have paid off high-interest debt
Have an emergency cash fund in place
Break Down Your Current Investments. Categorise your investments into: Cash, Equity, Bonds, Real estate, Alternative assets, including fine wine.
This breakdown will help you create a target allocation range for each asset class in your portfolio. The allocations should align with your risk tolerance and time horizon.
For instance, if you’re younger, you may be more comfortable with higher-risk assets like equities and alternatives.
For example, if you have a conservative approach, you might allocate only 1-3% of your total net worth to fine wine. If your income is less stable, you may want to stick to the lower end of that range.
Formula for Fine Wine Investment. The amount that you can invest in fine wine is calculated as below:
Amount to Invest in Fine Wine =
(Total Net Worth × Target Allocation Percentage +
Annual Income × Income Allocation Percentage)
× Risk Adjustment Factor
Now that you’ve determined a range, in Step 3 we’ll assess your risk tolerance so you can fine-tune exactly how much you’ll be comfortable investing in fine wine each year.
Step 3: Determine Your Tolerance for Risk
Understanding your risk tolerance is a cornerstone of investing. It helps align your comfort level with the inherent uncertainties of the fine wine market and your financial goals.
Your risk tolerance is partly influenced by your personality, but that’s not the whole picture. You might have a thrill-seeking personality, but if your finances are unstable, your tolerance for risk may be lower. Other factors that shape your risk tolerance include your investment experience, time horizon, and the quality of your net worth and income.
Your risk tolerance increases ↑ if =
Personality: thrill-seeking personality
Investment experience ↑
Time horizon ↑
Income security / stability ↑
Debt level ↓
Short-term liquidity needs ↓
To do now:
Answer These Questions. This simple quiz is designed to calculate your propensity to risk.
- How do you react to market fluctuations?
1: I worry a lot when the market drops | 2: I am somewhat concerned | 3: I am comfortable holding through volatility
- What is your investment experience?
1: I am new to investing | 2: I have some experience | 3: I am very experienced
- How important is portfolio stability to you?
1: Avoiding losses is very important | 2: I prefer a balance | 3: I am focused on long-term gains
- What are your financial goals?
1: I am focused on preserving wealth | 2: I am focused on moderate growth | 3: I am focused on maximum growth
- What is your time horizon for your investments?
1: Less than 5 years | 2: 5-10 years | 3: More than 10 years
- How stable is your income?
1: My income is unstable | 2: My income is stable | 3: My income is very stable
- What is your current debt level?
1: I have high levels of debt | 2: I have manageable debt | 3: I have little to no debt
- How much liquidity do you need in the short term?
1: I need a lot of liquidity | 2: I need some liquidity | 3: I don't need much liquidity
Scoring.
Below 16 points: Consider yourself "Conservative"
16 to 22 points: You have a "Moderate" risk tolerance
Above 22 points: You have an "Aggressive" risk tolerance
Risk Tolerance Profiles and Fine Wine Allocation. Now that you know where you sit in terms of risk tolerance, you can calculate your target allocation percentages.
Low Risk Tolerance (Conservative) Focus more on safer, income-generating assets like bonds and cash equivalents.
Net Worth Allocation Percentage: 1-3%
Income Allocation Percentage: 2-5%
This approach is for risk-averse investors or those with a shorter investment horizon, recognising the illiquidity and potential market fluctuations of fine wine.
Moderate Risk Tolerance (Moderate) A balanced allocation across equities, fixed income, and alternative assets.
Net Worth Allocation Percentage: 3-5%
Income Allocation Percentage: 5-7%
This approach is for investors with a balanced risk tolerance, willing to commit a larger portion of their wealth and income, understanding the potential for higher returns but also accepting the risks.
High Risk Tolerance (Aggressive) Allocate a higher percentage of your net worth to growth-oriented, higher-risk assets like equities and alternative investments, including fine wine.
Net Worth Allocation Percentage: 5-10%
Income Allocation Percentage: 7-10%
This is for experienced investors or those with a high risk tolerance, who see fine wine as a significant part of their strategy, despite its illiquidity.
Adjust over time. Your risk tolerance may change as your finances and goals evolve. Regularly reassess your risk tolerance and adjust your investment strategy accordingly.
Conclusion: Laying the Foundations for Fine Wine Investing
Congratulations!
You’ve completed the first part of the fine wine investing course, where we’ve focused on setting clear goals, assessing your financial health, and understanding your risk tolerance. These foundational steps are critical, as they guide your future decisions and ensure you’re investing in fine wine in a way that aligns with your personal and financial goals.
Fine wine investing is a journey, not a one-off transaction.
With your goals in place, a better understanding of your finances, and clarity on your risk tolerance, you’re well on your way to making informed, confident decisions. Remember, this isn’t just about accumulating bottles; it’s about building a meaningful, diversified portfolio.
What to Expect Next
In two weeks, we’ll dive deeper into the practicalities of fine wine investing. We’ll cover how to choose an investment platform, understand storage requirements, and assess how hands-on you want to be with your fine wine investments.
→ Yes, we’re almost at the paywall.
What’s Behind the Paywall?
While this course is free and packed with valuable information, I’ve also added a couple of optional features for paid subscribers to enhance the experience. In addition to the Google Sheet that simplifies your fine wine investment calculations, paid subscribers will also gain access to a Voiceover of the article, where I personally read through the content, ideal for those who prefer listening to the content or want to absorb the information while multitasking.
The Voiceover and Google Sheet will help you:
Understand the material in a more engaging format
Gain additional insights as I elaborate on key points
Track your investments with the help of the Google Sheet
The reason these tools are behind a paywall is simple: creating and maintaining these resources takes considerable time and effort. But beyond that, they provide a streamlined, efficient way for you to make sound financial decisions about fine wine. Plus, if you choose to access the sheet and the Voiceover, it’s also a way to support my work and ensure I can continue offering high-quality, free content to everyone.
You don’t need the Google Sheet or the Voiceover to follow this course—everything essential is available for free. But if you’d like a little extra support and a more interactive experience, these resources are available to you.
