Wealth Money Management: Can Liquid Assets Like Wine Be Featured In An Investment?
Most people might find investment in liquid assets like wine unfathomable or questionable, given that the wine bottles have to be cordoned off in a wooden case.
A lot of people may perceive wine as simply a beverage, or at best a collectible.
This is far from the truth as a particular category of Investment-Grade Wines has emerged in recent years as an alternative investment class.
The characteristics of Investment-Grade Wines are pretty much similar to high-yield bonds, gold, and fine art.
These assets are by large uncorrelated with stocks, so they provide a higher level of portfolio diversification and risk reduction.
Do you know that the returns on Investment-Grade Wine have dependably outperformed blue-chip stocks over the past fifty years? Fine wines have become very easy to trade online and owning your own storage cellar is no longer necessary.
In spite of rising prices, Investment-Grade Wines are still one of the least expensive, easy to trade, and most profitable investment opportunities around.
There is no other market quite similar to the market for Investment-Grade Wines.
For centuries, this asset has been in high demand due to its limited quantity.
With the expansion of the world's wealth and through consumption, each bottle in each vintage grows increasingly limited by the day.
Every year, investors have the opportunity to buy the new vintage at the cheapest available prices.
When the consumption period begins and supply decrease, prices move higher, eventually reaching some point decades later where only a handful of a particular wine or vintage remains.
Investors who own that remaining supply can all but name their price.
This is the wine industry's futures market and the back-vintage market that ultimately emerges years later.
Both are two distinct investment opportunities with their own unique strategies.
Wealth Money Management: Futures Investment Strategies - There are two ways to invest in the futures market, meaning there are two ways to exit with a profit.
The first way is for short-term investors to get out with a reasonably good profit and put those proceeds back to new futures contracts.
After buying futures contracts, the first opportunity to exit your position is when the wine is delivered.
The wine is probably three years old at this point and now has a score and one or more key reviews.
If the scores are high and the reviews are excellent, investor and collector demand will surely exist.
At this stage, the price will most certainly be higher than the price paid originally.
The transaction will likely be done through a merchant since that's where most investors and collectors go to be assured of a wine's origin, or its traceable history from winery to current owner.
The second way is for long-term investors who will have to wait another five to seven years before the profits can be realized.
This is because after the initial short-term spike, the wine's price will stay flat for several more years as the bottles will be resting in the cellars awaiting their debut.
As the waiting years draw to a close, fine restaurants all over the world will begin to debut these wines on their menu.
This is when consumer demand will drive the market and prices will once again move higher with the increasing numbers of bottles being consumed.
Theoretically, there is a third strategy, which is trading contracts with other investors before the wine is delivered.
This is taking place every day at the Chicago Board of Trade and the New York Mercantile Exchange.
Currently, this practice has no impact to the wine futures.
No mechanisms are in place to transfer ownership or physical bottles of wine as yet.
Until the day when contracts can easily be sold multiple times between investors and collectors, there is no value in the contracts to anyone other than the investor.
The monetization of the futures can only take place when the wine is being delivered.
Wealth Money Management: The Back-Vintage Strategies Similar to futures investing, back-vintage investors generally have two primary strategies.
The first strategy is to buy relatively young wines, those about five years from being opened for the first time and cellar them until the wines begin to appear on the menus.
This is when you sell them off to monetize the profits and then reinvest the proceeds in another batch of Investment-Grade Wine about five years from hitting its consumer phase.
The wine investment funds have pursued this approach with the expectation of generally double in value over five-year holding period and giving a return of close to nine percent annually.
For the past years, the funds have generally fared well because of the stellar vintages and new buyers coming from the emerging markets.
On the hindsight, if a string of lackluster vintages piles up or demand drops because of global economic conditions, the returns could soften.
The Investment-Grade Wine prices will still be likely to move higher, but with a slower place.
The advantage of using this strategy is that you do not have to concentrate on the highest-rated wines.
Many Second to Fifth Growth wines rated in the 95-to-97 range generally do well with this strategy.
Their prices are comparatively lower than the premier names and so the base of consumers is substantially larger.
This will mean that more bottles will be pulled out of circulation, ultimately making it easier for the price to double.
The second strategy is to buy much older back vintages that are already drinking well.
This strategy largely focuses on either the best wines or the greatest vintages, or both.
In focusing on the best wines, it means 1.
Concentrate on buying the best pedigree or buying wines with the highest scores regardless of name.
The fact that so few peers exist at this level, demand from collectors is effectively limitless so these wines historically perform well as investments.
2.
Concentrate on the greatest vintages.
Wines from the vintages every connoisseur knows by heart are always in demand among consumers and collectors.
With this approach, investment can be spread across just about any Investment-Grade Wine with a score of 95 or higher from a respected reviewer.
3.
Concentrate on wines that are at least a decade old, with scores of 93 or 94, but that have begun drinking very well based on updated reviews.
This is to look for wines with scores that are on the ascent in consecutive reviews, betting that the wine will continue to improve with further aging and that future reviews will push the score to at least 95.
At that point, the wine is officially an Investment-Grade Wine and its price will likely reflect that improvement in quality.
Wine is, first and foremost, a beverage.
However, there is an asset hidden inside this liquid.
Investors have increasingly recognized that asset and are moving money into fine wine investment.
In a market characterized by continually increasing demand and continually decreasing supply, investors know that they have found an investment opportunity.
Hope that you enjoy this article and find it informative.
A lot of people may perceive wine as simply a beverage, or at best a collectible.
This is far from the truth as a particular category of Investment-Grade Wines has emerged in recent years as an alternative investment class.
The characteristics of Investment-Grade Wines are pretty much similar to high-yield bonds, gold, and fine art.
These assets are by large uncorrelated with stocks, so they provide a higher level of portfolio diversification and risk reduction.
Do you know that the returns on Investment-Grade Wine have dependably outperformed blue-chip stocks over the past fifty years? Fine wines have become very easy to trade online and owning your own storage cellar is no longer necessary.
In spite of rising prices, Investment-Grade Wines are still one of the least expensive, easy to trade, and most profitable investment opportunities around.
There is no other market quite similar to the market for Investment-Grade Wines.
For centuries, this asset has been in high demand due to its limited quantity.
With the expansion of the world's wealth and through consumption, each bottle in each vintage grows increasingly limited by the day.
Every year, investors have the opportunity to buy the new vintage at the cheapest available prices.
When the consumption period begins and supply decrease, prices move higher, eventually reaching some point decades later where only a handful of a particular wine or vintage remains.
Investors who own that remaining supply can all but name their price.
This is the wine industry's futures market and the back-vintage market that ultimately emerges years later.
Both are two distinct investment opportunities with their own unique strategies.
Wealth Money Management: Futures Investment Strategies - There are two ways to invest in the futures market, meaning there are two ways to exit with a profit.
The first way is for short-term investors to get out with a reasonably good profit and put those proceeds back to new futures contracts.
After buying futures contracts, the first opportunity to exit your position is when the wine is delivered.
The wine is probably three years old at this point and now has a score and one or more key reviews.
If the scores are high and the reviews are excellent, investor and collector demand will surely exist.
At this stage, the price will most certainly be higher than the price paid originally.
The transaction will likely be done through a merchant since that's where most investors and collectors go to be assured of a wine's origin, or its traceable history from winery to current owner.
The second way is for long-term investors who will have to wait another five to seven years before the profits can be realized.
This is because after the initial short-term spike, the wine's price will stay flat for several more years as the bottles will be resting in the cellars awaiting their debut.
As the waiting years draw to a close, fine restaurants all over the world will begin to debut these wines on their menu.
This is when consumer demand will drive the market and prices will once again move higher with the increasing numbers of bottles being consumed.
Theoretically, there is a third strategy, which is trading contracts with other investors before the wine is delivered.
This is taking place every day at the Chicago Board of Trade and the New York Mercantile Exchange.
Currently, this practice has no impact to the wine futures.
No mechanisms are in place to transfer ownership or physical bottles of wine as yet.
Until the day when contracts can easily be sold multiple times between investors and collectors, there is no value in the contracts to anyone other than the investor.
The monetization of the futures can only take place when the wine is being delivered.
Wealth Money Management: The Back-Vintage Strategies Similar to futures investing, back-vintage investors generally have two primary strategies.
The first strategy is to buy relatively young wines, those about five years from being opened for the first time and cellar them until the wines begin to appear on the menus.
This is when you sell them off to monetize the profits and then reinvest the proceeds in another batch of Investment-Grade Wine about five years from hitting its consumer phase.
The wine investment funds have pursued this approach with the expectation of generally double in value over five-year holding period and giving a return of close to nine percent annually.
For the past years, the funds have generally fared well because of the stellar vintages and new buyers coming from the emerging markets.
On the hindsight, if a string of lackluster vintages piles up or demand drops because of global economic conditions, the returns could soften.
The Investment-Grade Wine prices will still be likely to move higher, but with a slower place.
The advantage of using this strategy is that you do not have to concentrate on the highest-rated wines.
Many Second to Fifth Growth wines rated in the 95-to-97 range generally do well with this strategy.
Their prices are comparatively lower than the premier names and so the base of consumers is substantially larger.
This will mean that more bottles will be pulled out of circulation, ultimately making it easier for the price to double.
The second strategy is to buy much older back vintages that are already drinking well.
This strategy largely focuses on either the best wines or the greatest vintages, or both.
In focusing on the best wines, it means 1.
Concentrate on buying the best pedigree or buying wines with the highest scores regardless of name.
The fact that so few peers exist at this level, demand from collectors is effectively limitless so these wines historically perform well as investments.
2.
Concentrate on the greatest vintages.
Wines from the vintages every connoisseur knows by heart are always in demand among consumers and collectors.
With this approach, investment can be spread across just about any Investment-Grade Wine with a score of 95 or higher from a respected reviewer.
3.
Concentrate on wines that are at least a decade old, with scores of 93 or 94, but that have begun drinking very well based on updated reviews.
This is to look for wines with scores that are on the ascent in consecutive reviews, betting that the wine will continue to improve with further aging and that future reviews will push the score to at least 95.
At that point, the wine is officially an Investment-Grade Wine and its price will likely reflect that improvement in quality.
Wine is, first and foremost, a beverage.
However, there is an asset hidden inside this liquid.
Investors have increasingly recognized that asset and are moving money into fine wine investment.
In a market characterized by continually increasing demand and continually decreasing supply, investors know that they have found an investment opportunity.
Hope that you enjoy this article and find it informative.
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