Recently I was asked if Ditton Wine Traders "do" wine investment. The short answer was no, but we can give you some advice. When drafting the advice for this potential, first time investor in the fine wine market, I came to the conclusion that there are a lot of companies around that offer fancy brochures and services and undoubtedly do a very good job. The flipside of this is that you do pay for that. And in the end, you don't really need that. What you do need is some basic advice that will allow you to select the right wines and avoid some of the pitfalls. So I thought I'd share my top ten tips with you – in line with our motto "making fine wine accessible".
1) The more stature the wine has, the better. As a rule of thumb, Robert Parker's rating is a good guide to that.
2) Stick with Bordeaux. They are more heavily traded than any other region and of all the top wines, these are still most in demand.
3) Within Bordeaux, there are really only 9 wines that truly merit the title investment wine. These are: Mouton Rothschild, Lafite Rothschild, Latour, Margaux, haut Brion, Ausone, Petrus, Cheval Blanc and La Mission Haut Brion.
4) Go for the best vintages: 1982, 1986, 1990, 1996, 2000, 2003, 2005. After stature of the wine, vintage is the most important driver of prices. Vintage acts rather like location in the housing market: when prices go down, those houses with the best location hold their prices best and only when people can’t afford these houses anymore do the next best houses go up in price (and are the first to go down).
5) If budget doesn’t allow for a combination of 3 and 4, stick with the best wines but trade down to slightly cheaper vintages that are relatively young: 1995, 1998, 2001, 2004, 2006.
6) Always make sure you buy original wooden cases (OWC) of 12 bottles of 75cl that are duty suspended (under bond), with impeccable provenance.
7) Make sure you have them professionally stored, in your own account.
8) Don’t pay for what you don’t need – most wine investment firms offer unnecessary services for which they charge steeply (at least in my view).
9) Make sure your investment horizon is a minimum of 5 years – although averaging a steady and healthy return of 10% yearly, wine prices can be volatile, just like the stock markets.
10) And finally, make sure you buy (and sell) cheap. Surprisingly, there are vast differences in price for the same wine, even between the London wine traders.
We could add a 11th criterium, which is timing. Obviously, when you buy in a trough you have a far better chance of making a good return than when buying in a booming market. Calling the bottom of the market is an impossible thing to do, although on this blog we do try and inform about market developments and occassionally vent our opinion on the right buying moments. I am positive that, in the long run, now is as good a time to buy as ever but at the same time, prices might go down further.
If you'd like to get some more advice, let us know. We would be more than happy to help.