Wine Investment: How It Works and How To Get Started

Wine collecting has long been a niche pursuit for connoisseurs, but it has steadily evolved into a popular alternative asset accessible to high-net-worth individuals looking to invest beyond traditional markets. 

In this article, we’ll examine wine investment as a means to diversify your portfolio. You’ll learn about: 

• Wine’s behaviour as an investment asset
• Different methods to invest in wine
• Risks inherent in wine investment

What Is Wine Investment?

Wine investment is buying wine as an asset whose value appreciates over time, rather than as a commodity for consumption. After a holding period, typically 5–10 years, the wine is sold on the secondary market for a profit.

While the same bottle of wine can be bought for either purpose, wine for investment is typically not the wine produced for mass-market sales. The appropriate investment wine is a fine wine, which lacks a definition but can have the following characteristics: 

Characteristic	Explanation
Quality	Fine wine is typically evaluated by critics to set a benchmark for quality, which is a subjective category
Origin	Fine wine traditionally comes from small, well-defined regions or single vineyards, though certain wines are challenging the standard
Age-worthiness	Fine wine is expected to age after being bottled, acquiring a more developed taste with time
Reputation	Wine from established producers with a track record of quality and secondary market appreciation is more likely to be considered a fine wine

Why Buy Wine as an Investment?

Wine belongs to a class of alternative investment assets—which includes art and gold—that exhibit low or no correlation with stocks and bonds. The value drivers for wine are largely independent of the stock market and include the production process, scarcity, and demand from collectors. These factors are shaped by weather, vineyard practices, and reputation rather than interest rates or broader economic cycles. As a result, wine is an excellent portfolio diversifier. 

Historically, wine has demonstrated strong growth. Wine from the Burgundy region has grown 105.8% over the past 10 years. Individual fine wines have also delivered substantial returns, with Château Les Carmes Haut-Brion increasing in value by 163% over the past decade.

Additional reasons to invest in wine include the following:

• As a tangible asset, fine wine is something you can actually own, and its quality gets better over time, regardless of its price 
• Once a vintage is bottled, no more of it will ever be produced, and the available stock will only shrink further as existing bottles are consumed
• With the introduction of new technologies in wine investment, fine wine has become more accessible and convenient, requiring less specialist expertise

In some jurisdictions, qualifying fine wine investments can be exempt from capital gains tax. In the UK, for example, fine wines that can’t be kept for more than 50 years might be considered wasting assets, exempting them from the tax. The wines that can age for 50 years or longer without spoiling will be taxed only if sold for more than GBP 6,000 (USD 8,100).

How To Make an Investment in Wine

To start investing in fine wine, you can use one of the following methods: 

1. Direct ownership
2. Wine investment platforms
3. Wine investment funds

1. Direct Ownership

Direct ownership is the outright purchase of specific bottles or cases of wine. This type of investment gives you the most control over your portfolio’s composition, but it also places the biggest management responsibility on you. 

There are several ways you can purchase fine wine to have direct ownership over it. You can:

• Work with a merchant you trust or a broker who will serve as an intermediary between you and the winemaker 
• Buy en primeur, purchasing the wine while it’s still in the barrel, usually two years before the wine is bottled and released
• Buy at auction, where established investment-grade wines are sold to the highest bidder

In addition to giving you full ownership and control over the wine acquisition, holding periods, and disposal events, this investment method also eliminates recurring management fees. If you want to, you can even decide not to sell your investment, but to consume it instead. 

Direct ownership also has some downsides:

• It requires hands-on involvement with sourcing the wines, authenticating them, and arranging for transport and storage
• En primeur purchases carry a risk, as wine is bought before it is bottled
• Bidding competitions at auction purchases can trigger rapid price appreciation, and a buyer’s premium can add significantly to the end costs

Who’s it for: Direct ownership is suitable for investors who prefer to have complete control over their investment and possess market knowledge to make independent investment decisions.

2. Wine Investment Platforms

Wine investment platforms are tech-driven services that source, store, and manage a wine portfolio on your behalf. The platforms will typically use specific algorithms and human expertise to create a portfolio or provide recommendations based on your objectives and risk tolerance, as well as their selection of wines.

Wine investment platforms can give you different types of ownership over wine: 

• Full ownership, where you invest in whole bottles or cases
• Fractional ownership, where you purchase a share in a bottle or case
• Syndicate ownership, where multiple people pool resources to purchase a portfolio and are allocated whole bottles based on their share 

Wine investment platforms can have lower barriers to entry than direct investment, in terms of both minimum investment and required expertise. They also provide a more hands-off investment experience and typically offer real-time portfolio tracking and valuations through a dashboard. 

The downsides of this method of investment include:

• Platform charge fees that will reduce net returns over time
• Control over specific bottle selection varies depending on the platform and whether it automates purchase decisions or only recommends wines
• The selection of wines can be limited by the platform’s ability to source them
• Fractional and syndicate ownership can further limit liquidity, since finding buyers can be challenging, or the investment structure might require the approval of all investors to exit

Who’s it for: Platforms are suitable for different investor profiles, from beginners looking for accessible, lower-minimum exposure to the market to experienced investors who want more control than a fund offers without personally managing storage and logistics.

3. Wine Investment Funds

Wine investment funds operate by pooling the funds from multiple investors to build a portfolio, which is then professionally managed by a portfolio manager. 

As an investor in a wine investment fund, you don’t have ownership over any physical bottles of wine. Instead, you own units of the fund.

Wine investment funds are a practical way to gain exposure to the market as they don’t require any involvement on your part regarding sourcing, storage, or resale of the wine. They come with professional management and market expertise built into their structure, and can typically offer greater access to wines from different regions, vintages, and producers than you would have as a direct owner.

Investing in funds comes with certain downsides:

• Funds will charge management fees, which range from 1%–3% of investment capital annually, as well as a 10%–20% performance fee on profits
• Funds have lockup periods, which don’t allow you to access your capital until the fund’s term ends or a redemption window opens
• Funds may only be open to accredited investors, and they may also have a higher investment minimum 

Who’s it for: Wine investment funds are suitable for investors who prefer a passive, fully managed investment experience and are comfortable with committing capital to a multi-year term.

Risks of Investing in Fine Wine

While fine wine can be a profitable investment and an effective instrument for portfolio diversification, it also comes with specific risks. 

One of the most obvious risks associated with direct ownership of wine is the storage requirements, as wine must be kept in tightly controlled atmospheric conditions. Storing your wine in a private cellar is an option; however, investors often prefer to keep it in bonded warehouses to avoid paying import duties and have a clearly documented chain of custody.

Wine can also incur other carrying costs, such as insurance, that need to be weighed against potential income. If you keep your wine in cellars or warehouses, insurance can be included in the storage price.

Other risks you need to consider and plan for when investing in fine wine include: 

• Provenance: Without extensive documentation that includes information about origin, storage conditions, and ownership history, the authenticity and value of wine can be harder to verify, making it more challenging to sell 
• A non-income-generating asset: Wine won’t produce any income until it’s sold, unlike real estate, which is a popular tangible asset that can produce rental income
• Poor liquidity: It can be harder and more time-consuming to convert wine into cash than traditional investment assets like stocks 
• Scams and fraud: Risks of scams and fraud include counterfeit wine, as well as fraudulent wine investment schemes 

Beyond these risks, wine has specific market and vintage risks that affect its potential for appreciation. Factors such as critic scores, growing conditions, and shifts in demand can all affect the performance of a specific wine, making past category-wide returns an unreliable predictor for any individual bottle. 

Diversifying Beyond Fine Wine Investment

Diversification is a strategy that protects any type of portfolio from overexposure to a single asset or asset class. Just as your wine investment protects your overall investment portfolio from overexposure to traditional stocks, you should also consider protecting your wine portfolio from overexposure to a single vintage or region. 

Another type of diversification you should consider is geographic diversification, or diversifying not only the jurisdictions where your assets are held, but potentially your own tax residency. This strategy can help you hedge against economic or geopolitical downturns in any single country. It can also serve as a cornerstone for reducing your tax liabilities and preserving your wealth from unforeseen risks.

Geographic diversification, however, can be a complex process, as it requires a practical understanding of tax systems and immigration regulations in foreign countries. A small mistake or misunderstanding can cost you time and resources, and even undermine the wealth protection you were trying to secure. 

Consultancy companies can help you sidestep those risks and ensure your geographic diversification strategy is built on accurate, up-to-date guidance. For practical assistance with the administrative processes of obtaining residence abroad, contact Nomad Capitalist.

Create Your International Asset Strategy With Nomad Capitalist

Nomad Capitalist is an advisory firm that specialises in global mobility and wealth protection. We’ve helped more than 1,500 clients achieve their financial and lifestyle goals by obtaining second residency and citizenship, legally reducing tax liabilities, and exploring investment opportunities abroad.

Our flagship service for geographic diversification is the Action Plan: a step-by-step blueprint built around your specific situation and needs. The Plan provides clear guidelines to help you efficiently achieve your international residency and asset protection objectives. 

Here’s what partnering with Nomad Capitalist looks like: 

1. We ask you to fill out a form to help us determine whether we’re a good match
2. We schedule a 45-minute onboarding call to learn more about your situation and needs
3. Our agents create an Action Plan and present it to you for approval
4. We implement the Plan over a 12-month period, managing the administrative parts
5. You keep receiving support from us even after the Plan is implemented

To help you explore your diversification options, Nomad Capitalist can advise you on the tax jurisdictions where securing residency would grant the most benefits. We can also help you decide on the most efficient way to become a resident in your chosen destination and manage the application process for you. To get started, reach out to Nomad Capitalist today!