Sip It or Cellar It? The Basics of Wine Investing

03/12/2013 by Forbes

Visitors to Liv-ex might be forgiven for thinking they were on a typical financial and trading news site. The site is peppered with charts and graphs showing commodity prices and performance over time. There’s even a ticker at the top of the page with stock prices scrolling by. But unlike countless other trading sites online, Liv-ex only measures one commodity: wine.

With a tough economy and a fluctuating stock market, people have been exploring unconventional investment opportunities. Wine has become an increasingly popular investment commodity during the past decade, and the Liv-ex 100—an index that tracks the 100 most sought-after wines—is the industry benchmark.

While prices on the Liv-ex 100 have stabilized and the exchange’s merchants are cautiously optimistic about future performance, first-time wine investors have a lot to learn before buying their first case of Bordeaux.

Uncorking the Basics of Wine Investment
Investing in wine requires more than just putting a case or two in your basement. The first thing novice wine investors need to understand is the wines themselves. Almost all investment-quality wines come from five regions: Bordeaux, Champagne, Tuscany, Burgundy and the Rhone.

While the four latter regions are gaining in popularity, the Bordeaux region continues to serve as the gold standard for wine investors. According to wine trading platform Cavex, two cases of Chateau Mouton Rothschild 2005—an iconic wine from the Bordeaux region of France—recently traded for £4,100 GBP (about $6,566 USD). Meanwhile, four cases of the Burgundy wine Ponsot Morey St. Denis Alouettes 2009 went for a more modest £275 GBP (about $440 USD).

Concerns for novice investors extend beyond the wines themselves. Procuring investment-quality storage is an issue. reports that professional wine storage typically starts at around $18 per month for a locker that can hold seven to nine cases of wine. Though that’s certainly enough for most first-time investors, those who want to expand their collection will find themselves outgrowing the minimum storage solutions quickly.

Other expenses include insurance, broker fees and, if you choose, the cost of joining trading exchanges like Cavex and Liv-ex.

Of course, there’s also the wait. Wine is not a commodity that provides fast returns. states that investors should expect to wait six to 10 years for their portfolio to achieve substantial value.

A Risky Vintage
Like all investments, wine comes with its fair share of risks. While the market for investment-quality wine has stabilized in 2013, it’s taken substantial tumbles in the past. Bolstered by new demand from China, prices for the world’s most desired wines rose by 250% from 2003 to early 2011. But when the bottom fell out of the Chinese Bordeaux market, wine prices tumbled across the board. In addition, wine prices are affected by unpredictable factors, such as the weather and even negative reviews from respected wine critics.

Wine investing also attracts its share of fraudsters. Wine fraud at the investment level typically involves selling counterfeit versions of collectible wines, a scam made all the easier since many investors may never actually see—let alone taste—the wines they’ve purchased.

One high-profile example of wine fraud involved a counterfeiter who allegedly sold more than $35 million worth of counterfeit Bordeaux and Burgundy wines during the early 2000s.

And, yet, for committed investors and wine enthusiasts, the world’s most sought-after vintages offer an interesting opportunity to explore a unique market. Novice investors may face a steep learning curve, but if wine is your passion, you’ll already have a great contingency plan: You can always drink it.

Commodity prices fluctuate more than other asset prices with the potential for large losses and may be affected by market events, weather, regulatory or political developments, worldwide competition, and economic conditions. Investment can be made directly in physical assets or commodity-linked derivative instruments, such as commodity swap agreements or futures contracts.

Ryan Galloway is a writer and editor based in New York City. He covers multiple aspects of business, technology, and energy.