Practical Guide To Fine Wine Investing [With Voiceover 🗣]
The Wine Merchants
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Hello Fine Wine Lovers,
Now that you know how much you can invest in fine wine each year, it’s time to start looking at how to invest.
Today, we’ll explore the how and, in two weeks, we’ll tackle the what.
The key question for today is:
Do I have to pick the wines myself?
The answer can be yes, no, or somewhere in between.
Alongside this free course, I’ve also created a Google Sheet, available behind a paywall (scroll to the end of the article). It’s an optional tool that organises all the essential data, metrics, and models to simplify your investment decisions. It’s not necessary, 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.
Let’s dive in!
Eight Steps To Invest In Fine Wine
To access the full course (for now, the first 6 steps), head to the homepage and click on “Fine Wine Investing Course” in the top bar.
Part 1: Released on 19th Oct 2024
Step 1: Set Clear Investment Goals
Step 2: Determine How Much You Can Afford to Invest
Step 3: Determine Your Tolerance for Risk
Part 2: Today’s Session
Today, we’ll look at the practicalities of investing in fine wine—exploring wine merchants and other platforms, storage options, and your level of involvement in decision-making.
Step 4: Determine Your Investment Style
Step 5: Choose an Investment Platform
Step 6: Fund Your Investment Account
Part 3: Coming Up in Two Weeks
Step 7: Pick Your Wines & Understand the Release Lifecycle
Step 8: Learn, Monitor, Review
Now, we begin…
Step 4: Determine Your Investing Style
Some people approach fine wine investing from a passion for wine. Others may see it as a means to diversify their portfolio or get a tax break. I doubt anyone reading this newsletter is here purely to make money.
Depending on where you start, it’s important to outline your path to investing.
Your investing style is crucial in shaping how you approach fine wine investments. Whether you prefer a hands-on approach or a more passive strategy, understanding your style helps you choose the right investment methods and tools.
Before diving in, remember there is often an information asymmetry and a conflict of interest between you and the person selling you the wine.
Information asymmetry means that the person selling you the wine has more information than you do about a certain wine. For example, how well the wine is selling, its quality, future potential, and more. This asymmetry can be reduced by educating yourself as much as possible.
What’s more, a wine merchant’s interests may not always align with yours. They may prioritise their commercial needs above your financial interests. For example, during market downturns, merchants sometimes use novice buyers on starter cellar plans to offload excess stock at inflated prices.
Like any other investment, you shouldn’t go in with your eyes closed.
Trust, but verify.
To Do Now:
Determine your level of knowledge & personal interest in the main investment wine regions. Start your investment journey with no more than one or two sub-regions and build from there. Attending wine events can be a great way to spark your interest—wine merchants are always keen to showcase their wines. 67 Pall Mall, for example, frequently hosts tastings.
France: Bordeaux, Burgundy, Champagne, Rhône
Italy: Barolo & other Nebbiolo-based wines, Tuscany
Spain: Rioja
New World: Napa Valley, Argentina, South Africa
Others (that may interest you): English Sparkling Wine (my long-time favourite), Sherry (my new passion), Madeira, Port, New Zealand, and more.
Determine your investment style for each region. Decide whether you enjoy researching and analysing fine wines, or if you prefer a more detached approach. If discovering new producers, following market trends, and tracking performance excites you, that suggests a more hands-on investing style.
DIY Investing: You don’t need to be highly knowledgeable to start investing. Just start. If you don’t feel confident, begin with 1 or 2 sub-regions based on what you’d like to drink or explore. Revisit your goals—what wines are on your list?
Professional Guidance: If you prefer expert advice and someone to manage your portfolio, there are solutions. For example, BBR offers a “Cellar Plan,” and Cru World Wine offers “Expert-Assisted Portfolios” or fully “Managed Portfolios,” to name a few.
Review your interest region by region and decide your approach—DIY, Assisted, or Fully Managed.
Compile a list of wine merchants in your area. There’s a common belief that investing in fine wine requires going through auction houses. If you also thought this, let’s dispel that myth. Auction houses like Sotheby’s and Christie’s specialise in rare, aged, or unique bottles, selling to the highest bidder in live and online settings. While there can be great deals, competitive bidding can drive prices up. Buyers should also be wary of authenticity issues and added fees, such as buyer’s premiums.
In contrast, wine merchants offer fine wine through direct retail, focusing on provenance, condition, and personalised service. They often build long-term relationships, provide storage solutions, and may offer en primeur options (we’ll cover this in Part 3).
Buyers can benefit from stock in bond, which means purchasing wine that hasn’t yet been subject to duty or VAT, making it more cost-efficient for investment purposes. That’s because you can defer paying VAT until the wine is withdrawn for drinking.
Now it’s time to compile a list of wine merchants in your area or those that ship to your region.
If I had a penny for every time a wine merchant said, “I can tailor the offers to your needs, but unless you spend $$$ per year, we won’t send you the top wines”…!
Do not let wine merchants pressure you into buying wines just to access better offers. If they won’t send you top offers, don’t buy from them. Full stop. And if no merchant is offering the wines you want, just wait for a market downturn (like now) and buy them on the secondary market (meaning: not at release). FOMO (fear of missing out) is very real sometimes, but the idea that you can only make money by purchasing wine X from merchant Y is simply not true. Especially in a market like the current one, with two consecutive double-digit down years.
During the first call with a wine merchant, they will likely want to know your level of knowledge, your expected spending, and the regions you’re interested in. I suggest using this as an opportunity to learn as much as possible about them.
For the first screening, make sure you know which merchants offer:
Delivery to your location
Ex-VAT pricing
Bonded storage
Managed portfolio services
Marketplaces or selling facilitation
To help with this, I’ve created a starter list of the main UK wine merchants in the Google Sheet (scroll to the end).
Step 5: Choose an Investment Platform
Now that you know your goals, risk tolerance, and investing style, it’s time to choose your wine merchant. The platform you choose will influence how you buy, store, and sell fine wines. You may use multiple platforms for different services, but be mindful—having too many accounts can complicate tracking and management.
To Do Now:
Evaluate Each Wine Merchant. Consider fees, features, and reputation. Merchants vary widely in what they offer, so identify the services most critical to you, such as market analysis tools & marketplace, same-day delivery, and secure storage solutions. Before committing, use the questionnaire below to ask crucial questions and identify any hidden costs or limitations.
1. Wine Purchase: Upfront Costs & Logistics ------------------------------------------- Purchase Price & Fees - Do you offer ex-VAT and in-bond prices for the wine? - Are there additional charges, such as import duties or local taxes, I should be aware of? - What payment terms do you offer? Is there a discount for early payment? Shipping & Handling - What are your shipping and handling charges (both domestic and international)? - Are there options for consolidated shipping, and how does this affect cost? - How long does it typically take to receive delivery after purchase? 2. Wine Storage & Cellaring: Ongoing Costs ------------------------------------------ Bonded Storage Fees - Do you offer bonded storage? If so, what are the annual fees per case of 6? Are there any discounts? - Are there additional fees for storing wines that require specific conditions (e.g., temperature and humidity control)? Insurance & Provenance - Are insurance costs included in the storage fees, or are they separate? If separate, what are the rates? - How is the insured value determined—market price, replacement value, or purchase price? - Do you provide condition reports and provenance documentation, and what are the associated costs? Long-Term Management - Do you offer portfolio management services? What are the credentials & past performance of your Portfolio Managers? - Is there an additional fee for managing the portfolio or for accessing portfolio valuation updates? - Do you offer re-labelling, re-corking, or other maintenance services, and if so, what are the costs? Hidden Costs - Are there any administration or account management fees? - What are your policies and costs if I want to move my collection to a different storage facility? - Is there an early exit penalty if I withdraw wines from bond or move them to a personal cellar? 3. Wine Selling: Transaction & Liquidation Costs ------------------------------------------------ Commission & Fees - If I sell the wine through your platform, what is the commission structure? - Are there marketing, listing, or documentation fees for selling wine? Transfer & Auction Costs - What are the fees for transferring wine between bonded warehouses or to a potential buyer? - Do you charge different rates for selling via auctions versus direct sales or consignment? Currency & Proceeds - Can I receive proceeds in different currencies, and if so, is there a currency conversion fee? - How long does it take to receive the proceeds once a transaction is completed? 4. Wine Consumption: Withdrawal & Delivery Fees ----------------------------------------------- Bonded to Private Transfer - What are the withdrawal fees for taking wine out of bond? - Are there additional costs to ship the wine from bond to a private address (e.g., customs, delivery)? Condition & Presentation - Do you offer services such as professional re-corking, re-labelling, or cellar inspections? If so, what are the costs? - Are there options for personalised or luxury packaging if I want to gift or display my collection? Unforeseen Expenses - Are there any other costs I should anticipate if I decide to withdraw the wine for drinking instead of selling?
Step 6: Fund Your Wine Investment Account
Now that you’ve selected a platform that aligns with your goals and preferences, it’s time to fund your account and start building your fine wine portfolio.
Exciting!
To Do Now:
Set Up Automatic Contributions or Create a Separate Fund. Consider setting up automatic contributions to steadily grow your portfolio. For example, BBR’s Cellar Plan accepts monthly contributions starting at £250. Alternatively, you can set aside an annual amount in a separate account or fund your portfolio on a need-to-invest basis.
Track All Contributions. Keep a log of every £ (or $!) that goes into your wine portfolio. Fine wine isn’t as transparent as other asset classes, so it’s easy to lose track of your total investment over time.
Start Investing. Once your account is funded, begin selecting wines that fit your strategy. However, don’t rush to buy just because your account is funded—wait for the right market opportunities! Remember: patience is key in wine investing.
Conclusion: Understanding The Unique Network of Wine Merchants
Congratulations!
This concludes Part 2 of the fine wine investing course, where we’ve focused on understanding how to buy (and potentially, sell!) your wine through the unique network of wine merchants. It’s never a waste of time to get to know the wine merchants in your area, understand how they operate, and learn their strengths and weaknesses.
You’ve now established a solid foundation by determining your investing style, choosing the right platform, and funding your account.
What to Expect Next
In two weeks, we’ll take a closer look at choosing wines, which wines to buy, when they’re released onto the market, and what drives their prices.
For some optional “homework” (for lack of a better word), I recommend reading (or re-reading) the Price of Wine article, which delves into the key components driving wine prices. I’ve recently recorded an audio version, so if you prefer to listen, that might be an easier way to review it!
→ Yes, we’re almost at the paywall.
What’s Behind the Paywall?
While this course is free and packed with valuable information, I’ve 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 gain access to a Voiceover of the article, where I personally read through the content — ideal for those who prefer listening 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 using the Google Sheet
The reason these tools are behind a paywall is simple: creating and maintaining these resources takes considerable time and effort. Beyond that, they provide a streamlined, efficient way to make sound financial decisions about fine wine. Plus, choosing to access the sheet and the Voiceover is 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 here for you.
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