Quezi

Tuscany Vineyard (photo by rayced - CC-BY)

There is a thriving wine investment market, and some people manage to turn a reasonable profit by investing in quality wines at the right price, and buying and selling at the right time.

But there’s one way you almost certainly won’t make a profit—and that’s by buying into a wine investment “opportunity” that is offered to you by a “cold-caller” (someone who contacts you “out of the blue”) who promises reliable returns. For the truth is that wine prices are not recession-proof, and even when they do increase it’s irregular: they don’t provide a sure and steady rate of return.

If the returns were as high and reliable as implied by the marketing-driven “wine investment companies”, the operators of those businesses would obviously be investing in wine instead of carrying on as investment operators. Instead, their business model is to make a lot of money out of the investment process, to the detriment of the investor.

Here are some of potential traps:

• The price at which you are sold the wine may be way over the market price of the same wine.
• The wine is supposedly placed into storage, but sometimes the wine doesn’t even exist. Other times, the wine exists, but is stored in the company’s name, and you may lose it if the company goes bust.
• Even if the wine is in your name, and the price of the wine rises, you must factor in the annual costs of storage and insurance before you have made a profit. Also you need to discount for inflation and tax, before you have made a profit in real terms.
• In addition to the purchase price, there may be a large commission to pay on the transaction.
• Some operators not only charge the buying commission, but also charge the selling commission in advance. So if they go out of business before you sell, you will need to pay an additional selling commission.
• Despite the implications of the marketing headlines, the fine print will invariably acknowledge that the operators are not wine experts and have no expectation that you will make a return on your investment.

Jim Budd has painstakingly compiled news, history and advice relating to wine investment schemes and scams. He makes this information available to all at his website investdrinks.org. It’s eye-opening reading, and no-one should respond to a wine investment scheme “offer” unless they have read and digested the content of this site first.

Once you are an informed investor, you might find wine investment an interesting and potentially profitable activity. But there’s no guarantee of riches. The best advice comes from the InvestDrinks home page:

Do not invest more than you can afford to drink if it does not work out.

(Thanks to Bryan Clough for suggesting the topic of this article.)