The second post in our series about investing in wines focuses on some key considerations.
1. The wine market is unregulated, unlike financial services. That means no requirement for qualifications, no regulatory oversight other than licensing obligations, no compensation scheme, etc. Investment scams continue - earlier this year, 150 elderly Americans were duped out of $13 million in a cold-calling fake wine and whisky investment scheme. So, it's paramount that you do business with a wine merchant or broker with a solid track-record. See The Bunch, for example.
2. Provenance of the wine is critical - is the wine genuine and has it been well-stored? Again, only buy from a trusted source, if you don't want to fall victim to someone like Rudi Kurniawan (see film 'Sour Grapes').
3. Store the wine professionally, preferably In Bond (exclusive of UK VAT and duty) so that you can sell to a global market. Ideal cellars are cool, dark and quiet. Storage needs to include insurance at replacement (rather than original) value, in the unlikely event of an accident.
4. Transaction costs are significantly higher than those of shares, for example. When selling, brokers and auction houses will charge approximately 10 to 15% of the sales value.
See here for further information on wine investment and storage, including our Vintage Portfolio service.