I have a secret strategy that all but guarantees you can make a profit buying and selling wine. It doesn’t work for any other asset class — you can’t use it on stocks, or paintings, or Rolex Submariners — but with wine it’s just the ticket.
I’ll share that strategy in a minute, but before I do, it’s worth unpacking a little bit of the idea that wine can ever make sense as an investment at all.
Certainly there’s no shortage of people trying to sell you on the concept. Companies like Vint, Cult Wines, and Vinovest will happily take your money and — for a fee — invest it in a diversified portfolio of wines they think will rise in value.
Some of these companies have a clear investment thesis that wine in general is likely to rise in value over time. Maybe they think the number of global wine drinkers and the number of wealthy people is growing, or the number of bottles of wine from great vintages is shrinking, or that climate change is making truly exceptional wine ever rarer and harder to find.
Others are more clinical, and like to talk about “uncorrelated assets” and the power of diversification. Wine, by this theory, is something that won’t necessarily plunge in value when your stocks do — and will therefore help out your overall portfolio just when you need it most. Wine is much easier to diversify than more unique collectibles like paintings; it’s also easier to sell. (In finance jargon, that makes it “liquid,” heh.) This makes it a compelling investment, for some.
A final group will blind you with mathematics. Take one Gaussian copula, one multivariate distribution, a few thousand synthetic return scenarios, and a computer-intensive Monte Carlo simulation, and you can generate a precise quantitative value for what adding some wine does to the Sharpe ratio of your aggregate portfolio. (I swear, if you show this paragraph to someone with a PhD in finance, they will nod along and say it makes perfect sense.)
Wine cellars only come in one size: not big enough.
There may well be something to these, and perhaps one of these pitches will persuade you. But if it does, that might be because on some level you want to be persuaded. All these approaches carry the distinct aroma of ex post facto rationalization. After all, the one thing that investors in wine universally have in common is that they are wine lovers — specifically, vintage wine lovers. They know how (some) wine improves with age, because they have experienced that themselves. Their cellars contain gems covered in dust that they love too much to sell at almost any price — and that gives them confidence that fine wine will always have great financial value.
That can be a dangerous line of logic to follow. As my friend Jacob says, wine cellars only come in one size: not big enough. You want to have some wines to choose from, so you buy a lot — and then it becomes a habit, and decades can go by without a year where you consume more wine than you acquire. Your collection grows and grows in a way that would be quite terrifying if you knew you had to drink it all at some point. But that’s exactly when the demon arrives on your shoulder to tell you that, hey, you don’t have to drink it all at some point. If you want to, you can always sell it! And maybe even make a profit! The possibility of selling wine tomorrow becomes a justification for buying more wine today — even if you’re nowhere near the point at which you’re keeping close tabs on which wines in your cellar really need to be sold if you’re not going to drink them soon.
Wine doesn’t only get too old before you really notice, it also falls out of fashion — just ask anybody who stocked up on California Merlot in the 90s. Individual tastes change, too: a wine you loved a decade ago might no longer be the kind of thing you like to drink today.
It sounds like a cheat, and maybe it is, but it’s a delicious one, and it works. At least in theory.
Still, the dream of making money by buying wine will never die. Ten years ago, Balthazar in New York City — a restaurant, not a wine merchant — listed the 2007 Clos Rougeard on its menu for $119. Today, that bottle costs $600 retail, if you can find it (which you can’t). All you needed to do was buy an extra case, and you’d be up more than $6,000 today. (The key word being extra — after all, you’d still want to drink some!)
Which brings me to my secret strategy — a four-step process:
Step One: buy only wine you love to drink, and that can age well (and therefore rise in value). The trick is to have a cellar where, if someone went down there and picked a bottle at random for tonight’s dinner, you’d be delighted no matter what they returned with.
Step Two: keep an eye on the value of your wine. Be sure that you know which bottles are going up in value — and which bottles are going down.
Step Three: keep on drinking! The whole plan falls apart if you don’t drink wine. Naturally, the wines that you drink are consumption, they’re not investment. They don’t count towards your profit-and-loss. Crucially, however — and this is where the discipline comes in — you can only drink wines that have fallen in value.
Step Four: take the wines that have risen in value, and sell them at a profit.
Sell your winners and drink your losers — it sounds like a cheat, and maybe it is, but it’s a delicious one, and it works. At least in theory. In practice, very few of us are disciplined enough to even know exactly what’s in our cellar, let alone how much its value has changed or when the market might consider certain wines past their peak. There’s a small group of professional wine dealers who make a living by buying and selling wine; for the rest of us, the easiest thing to do is just to drink it. Much easier than actually buying wine as investment is just to dream, once in a while, of how much that bottle we drank a decade ago might be worth today.
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