Before getting too excited, investing in wine has quite a few potential drawbacks. Traditional investment vehicles are regulated and controlled in most countries but no such basic security exists for investments in wine. Investors must watch out for counterfeit wines and can lose their investment if their merchant goes belly up (due to incompetence or fraud) Not to mention the numerous companies that have sold poor wine to new and naive investors at outrageous prices.
Even if you manage to avoid the big mistakes and traps, you still have no guarantee that your wine investment will increase in value. Good investments are supposed to pay annual dividend. But wine investors don't get any dividend, instead they have to pay for storage.
Also, if you decide to invest in wine, you should keep your investment wines separate from the wines you buy for your own consumption. While the best investment wines are technically good, you may not like to drink them.
The Liv-ex (London International Vintners Exchange) 100 index is made up of over 91% of red Bordeaux wines and one percent of white Bordeaux wines. Champagne and red Burgundy have a little bit over three percent each and the remaining percent is made up of Italian and Rhone wines. Also the broader Liv-Ex 500, is dominated by red Bordeaux wines, although not as much as the Liv-Ex 100.
So how do you get started investing in wine? First decide your level of commitment. Most people collect wines they like to drink themselves. A dedicated wine investor on the other hand, buys the wines that are supposed to give the best financial return without considering personal taste.
You can buy wine futures as well, that is pay now and get your wine later. For most people this is best avoided. Often the price difference between the future price and the price once the wine hits the market is small. And sometimes, especially in recessions, the future price can turn out to be higher than the actual market price.
Buying wine is easy, storing it is another story. And for the wine investor, storage is extremely important. You can read more about how to store wine here