During the spring semester of my junior year, I studied abroad in Madrid, Spain. After studying Spanish for 8 years, I was ecstatic to finally get the chance to practice the language outside the classroom setting and live in a foreign country. To prepare, I spent the summer prior interning at a fintech company to make sure I had enough money to last me through the semester. That being said, I had a million travel plans which meant my airline tickets took priority over my food and beverage. This meant I cooked everything at home and would only go out to eat unless on special occasions. AND it meant I would only drink discount wine.
When you live in Europe, bodegas become a part of your daily life. In Madrid, my roommates and I had a favorite bodega just down on our street which we frequented for Prince cookies during the week and affordable bevvies on the weekends. My favorite (and cheapest) wine came in a box and was called “Cumbres de Gredos” which sold for around $1.70 at the time.
I was so proud of myself for sticking to a budget while not forgoing my fun abroad. Then, one of my friends came to visit for the weekend from Barcelona. I decided to cook for her and serve my favorite wine before clubbing. When we sat down for dinner, she noticed something on the label and blurted “Do you know you've been drinking cooking wine? It says right here on the label.” I was mortified and slightly concerned because I wasn’t even sure if you could drink cooking wine. We then ran to the bodega and asked the man at the counter if it was indeed cooking wine and he responded, “yes, I thought you cooked a lot.” While that’s a valid point, I was fairly certain he gave me a few straws over the past few weeks along with my purchase but that was beside the point.
And this leads me to today’s topic, investing in wine. Because sometimes the cheaper option isn’t always the best investment.
WTF are you talking about?
In this article, I’m going to talk to you about investing in wine. And don’t worry if you’re not a millionaire. You actually don’t have to be to access this asset class. And, if you love wine like me, you might as well figure out a way it can love you back.
What does cooking wine and wine investing have in common?
Be Mindful of Quality: Although I was trying to be responsible and economical, my investment into cooking wine did not pay off. I am actually surprised I didn’t get sick. Not even my aerator could fix the taste of diluted grape pond water. With wine investing, you need to be mindful of quality. That being said, price does not immediately equate to quality. One of the easiest ways you can check wine ratings is through Vivino.
Price Doesn’t Immediately Mean Quality: While I admit I was not buying Cumbres de Gredos for quality, I mistakenly thought that price was the only way to determine quality. Therefore, if I was going to get cheap wine, I would need to forgo quality entirely. That’s where I was wrong. There are tons of affordable options for wine that are incredible and you don’t need to sacrifice your health to find them.
You Have Options: When I first went abroad, I had a very limited budget. With that in mind, I didn’t waste time weighing my options. I found the cheapest and nearest option and went with it. However, if I just spent a few more minutes, I would have realized how many options I had. For instance, I could have bought a jug of wine (larger in size, lower in unit economic cost, and non-toxic). I also could have considered another bodega a few blocks away that had 10 times more options. However, in the moment, I had blinders on and was focussed on the path of least resistance. When investing in wine, you can get trapped in the same cycle. If you think you can’t afford something, you might just buy a cheaper bottle even if you don’t like it instead of considering other options.
They are Multidimensional: Although the cooking wine was far from directly digestible, it had use beyond Friday night pregaming. When I found out it was cooking wine and had a few boxes in the pantry, I decided to repurpose (or actually use it for its intended purpose) and ~cook~ with it. I made pasta with bolognese, risotto, and a fish wine sauce. With wine investing, you also have options. Some of you will choose to invest in wine so you can throw elegant dinner parties and show off your stash to friends. Others will choose to invest in wine for the value appreciation and treat it as a commodity (my preferred preference as I still have no taste for good wine and prefer to drink whatever my friend Ben tells me is good).
How do I invest in Wine?
Buy Wine Directly: This is for all you hard core readers that have wine fridges and want to physically hold your assets.
Step One - Do Your Research: While I am no som, there are thousands of types of wine. Make sure you do research on vintages, wine markers, quality, and track the direction of the market. Beyond Vivino, you can check out Wine Spectator which provides expert reviews on wine and insights into the direction of the market.
Step Two - Figure Out Your Strategy: Now that you have a grasp on the industry, you want to figure out a strategy. How much money do you want to spend on wine and what is your goal? If you don’t have a dollar saved for retirement, I would suggest starting with an emergency savings fund and maxing out retirement before diving into the world of wine. Once you’ve laid the groundwork, pick a strategy. Do you want to go all in on natural wine or sparkling wine or are you interested in just getting a diversified pool of wines. Only you can make this determination based on your pallet.
Step 3 - Determine Where You Will Buy From: There are many ways to get access to wine directly such as wineries, auction houses, specialty stores, or even brokerages Liv Ex. This site is particularly awesome, because if you don’t want to store the wine, they will actually be your custodian (aka, they will hold the wine for you and exchange it with whoever buys it from you). If you don’t want to pay for such a broker fee, there is always the option of exploring places on your own and buying wine directly from merchants or vineyards. You just need to be mindful that if you find a seller directly, you will also need to find a buyer directly.
Buy Wine Stocks: This option is for everyone that believes in the wine industry but wants a bit more access to liquidity and doesn’t want to deal with physically handling wine.
Public Stocks: For one, you can purchase public wine stocks through your brokerage account. You can check out some of the top performing wine stocks here. I would also recommend re-reading my article on due diligence because analyzing wine stocks is no different than any other stock. It’s all about figuring out which ones work best for you, if they are at the proper price point, and if you believe they will appreciate in value.
Private Stocks: If you want more direct access, you could consider alternative wine assets such as VinoVest. They provide carefully curated portfolios and access to wine. One major difference between this and public stocks is liquidity, so make sure you understand the risk and time horizon difference before pouring your dollar into them. Also be cognizant of cost. VinoVest may outperform some public equity stocks but they certainly have higher management fees as well.
Things to Be Mindful Of:
Liquidity: You know what is coming. Wine might not always be liquid. This basically means that when you hold wine, it might not be as liquid as a typical stock. Liquidity is the availability of assets to a market or company. In other words, it describes how easy it is to buy or sell something. For example, publicly traded stocks are typically very liquid because on a daily basis there are thousands of buyers and sellers. A house on the other hand is typically not a liquid asset because on a given day, there may be less buyers if you were to put a home on sale. The same goes for wine. If you put your vintage Two Buck Chuck from 2017 that you bought during college on ebay, you may or may not find a buyer and the wine indeed may not be as liquid.
Storage: If you intend to buy wine directly and hold it, make sure you prepare to store it appropriately. Not all wine will be as sustainable as my boxed cooking wine that had a shelf life of 300 years. Some wines need to be stored in certain temperatures while others need to be protected from sunlight. So if you decide to purchase an expensive bottle after a few wine tastings in Napa, make sure you take care of it as well as your hangover the following day.
Depreciation: One Christmas, I was sitting at the dinner table with my family and my dad got super excited. He said we were going to open an important bottle of wine to celebrate the holiday. He brought out nice glasses, popped the bottle and proceeded to serve everyone. We all toasted to a happy and healthy new year and took our first sip and every person proceeded to spit it out. I asked my dad what year it was from and he said something like 1973. Although it had a beautiful vintage look, the vintage taste was not as appeasing. With that said, don’t forget that wine has an expiration date and can be a depreciating asset.
Return: When you read about alternative assets, its easy to get trapped in headlines such as “wine has outperformed the S&P by over 1000%.” While certain statistics will show this, it depends on the way you look at the data. Some wine stocks may have outperformed the S&P but certain bottles may not have. Consider risk and make sure not to put all your eggs in one basket. Or in wine terms, not too many bottles in one fridge.
Thank you for reading!! If there is a topic you want to discuss, please DM me on Instagram at @notyourbfsinvestmentadvice or email me at firstname.lastname@example.org. I also am building a company called Aura - a financial wellness and investment platform. If you’re interested in joining the beta, sign up here.
See you next week lover!
All investment strategies and investments involve risk of loss. Nothing contained in this website should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.