Why invest in fine wine? Firstly, its addition to an investment portfolio provides diversification – which mitigates risk. It is also a tax-free asset that performs consistently while providing portfolio protection in a way that traditional financial assets fail to offer.
Fine wine can remain stable under difficult economic conditions and demand for it is consistently strong. As a real asset, it is also an attractive option as real assets tend to change in value independently of core financial markets.
But most importantly – as academic research has shown – fine wine has historically produced long-term average returns in the region of 13% per annum, while showing a low correlation with traditional financial assets.
A comparison between wine market performance and that of global equities shows that during periods of economic deterioration, wine has performed significantly better. At times when economies and financial markets have suffered, wine has provided recession-proof characteristics – thus highlighting the benefit of investing in a tangible asset.
Lastly, its supply-and-demand imbalance will consistently drive prices upwards.