Investing in other assets has become a very popular way to diversify beyond traditional stocks and bonds. Wine and whiskey, in particular, are gaining momentum due to their strong earnings potential, resilience during the recession, and growing demand.
If the predictions of Goldman Sachs and Vanguard are true for the lowest stock market returns in the next 10 years, then it makes sense to look for other investments that can increase the returns. A 3% – 5% average annual potential return on the S&P 500 is not attractive, especially given the inherent volatility in public stocks.
As a 47-year-old, I'm in the experimental phase of investing in wine and whiskey, especially since I live 1.15 hours from Napa Valley. For the school's “daddy's night” events, we had several whiskey and tequila parties, which were a lot of fun.
At this stage of life, I am very focused on it I enjoy my money very much issued shares and bonds do not provide assistance. Having purchased my “forever home,” along with collections of rare Chinese coins and books, I am now excited to dive into wine and whiskey as the next addition to my portfolio.
Why Grow Wine and Whiskey?
Recently, I received a newsletter from Hustle Fund, an emerging equity fund Vinovest as one of their investments over the years. That immediately piqued my interest as I had discontinued Vinovest in 2020, at the beginning of the pandemic.
It was great to hear that Vinovest was still growing, so I reached out to the CEO, Anthony Zhang, to chat and get an update four years later. It turns out that Vinovest has expanded from offering premium wines to now including whiskey. I was just drinking Yamazaki 12 with friends the other day.
In this post, we'll explore the reasons why investing in wine and whiskey might make sense for you, how Vinovest works, and the potential risks and rewards involved.
1. Strong Historical Wine Performance, Followed by Correction
Fine wine, with a long history of appreciation, sometimes outperforms traditional assets such as stocks and bonds. Over the past 15 years, fine wine has returned an average of 10.6% annually, according to the Liv-ex Fine Wine 100 Index.
Whisky, although relatively new as an investment vehicle, has shown explosive value growth in recent years, with rare bottles depreciating by hundreds of percent in just a few years.
These returns are driven by the supply and demand of energy. Fine wine and whiskey are produced in limited quantities, too as they grow older, their deficits increase. At the same time, global demand for these products is growing, especially in emerging markets where new wealth is fueling an increase in luxury consumption.
However, starting in 2022, fair prices for wine have been adjusted by around 22%, which I think presents an investment opportunity. I missed the good wine boom of 2020 and 2021, so I'm excited to revisit the commodity section now that prices are down.
2. Low Connection to Traditional Markets
One of the key advantages of investing in other commodities like wine and whiskey is their low correlation to traditional financial markets. When stock markets fluctuate/decline, wine and whiskey often remain stable, providing a hedge against the downside of more traditional investments.
This low correlation makes these assets an attractive addition to a well-balanced portfolio, especially for those looking to reduce their overall risk exposure.
3. Tangible property with intrinsic value
Unlike stocks, bonds, or cryptocurrencies, wine and whiskey are tangible assets with intrinsic value. Even if the market value fluctuates, the underlying asset is still there and valuable. This is particularly attractive to investors who want to own physical assets, as opposed to digital or paper assets.
In the worst case scenario, you can still enjoy your investment—by drinking the wine or whiskey yourself or by selling it on the secondary market for a quick return. If you want to get rich and stay rich, you must practice turning fake money into real assets.
How Vinovest works
Vinovest is a platform that simplifies the process of growing wine and whiskey. Traditionally, investing in these goods required significant expertise, access to manufacturers, and storage facilities to keep the products in good condition. Vinovest removes these barriers by managing all aspects of the process on your behalf.
1. Creating an Account
To get started, you just need to create an account with Vinovest. During the registration process, you will answer a few questions about your investment objectives and risk tolerance, which helps Vinovest recommend a portfolio tailored to your needs.
2. Customizing the portfolio
Once your account is set up, Vinovest builds a diverse portfolio of fine wines and whiskeys for you. You can choose the hands-off method and let Vinovest's algorithm do all the work. Or you can be more involved in choosing the types of wine and whiskey you want to invest in.
Vinovest's team of experts sources wines and whiskeys directly from trusted producers and sellers, ensuring authenticity and quality.
3. Storage and Security
One of the most important aspects of wine and whiskey investing is proper storage. Vinovest manages this by storing your goods in professionally managed, climate-controlled facilities that ensure products age properly. These facilities are fully insured, giving you peace of mind that your investment is protected.
4. Selling Your Investment
Vinovest also facilitates the sale of your wine and whiskey when you are ready to cash out. The platform connects you with buyers on secondary markets, allowing you to take advantage of market demand and get the best price for your goods. Alternatively, you can choose to have your wine or whiskey delivered to you if you would like to keep or consume it.
Risks and Considerations for Investing in Wine and Whiskey
Although growing wine and whiskey has many potential benefits, it is important to be aware of the risks involved.
1. Liquidity
Fine wine and whiskey are not liquid like stocks or bonds. It may take time to sell your investment, especially if market demand is low. Although Vinovest offers access to secondary markets, the process may take longer compared to selling a traditional financial asset.
2. Market volatility
As with any investment, the value of wine and whiskey can fluctuate depending on market conditions. Factors such as vintage quality, brand reputation, and broader economic trends can affect prices. Although these assets tend to hold value over the long term, short-term volatility is still a risk.
3. Costs of Holding, Securing, and Trading Tangible Assets
Vinovest charges fees to maintain, insure, and manage your portfolio. There is a 2.5% transaction fee (includes last 3 months). This fee is charged when you buy wine at Vinovest Marketplace.
There is a 1% sales fee on the side. This fee will be charged when the wine is sold to another user on the exchange. This will be automatically deducted from your cash balance.
Finally, there is an annual storage fee of 1.5%, charged monthly. While these fees pay for essential services, they eat into your overall profits. But unlike holding stocks, it takes physical labor and space to store real goods like wine and whiskey.
How do you say “paradise” in French? pic.twitter.com/H1o1bPIIGt
— Anthony Zhang 🍷 (@anthony_j_zhang) October 24, 2024
Enjoy Your Investment
The ability to enjoy your investment has become my main focus after turning 40. Sooner or later on your journey to financial independence, you may start to feel that money loses its purpose if you don't actually use it.
However, after years of systematic investing, it can be difficult to switch to spending mode. That's why investments like wine and whiskey are so attractive—they provide the double benefit of pleasure and money-making potential.
Even if you're not a big fan of wine or whiskey, I think you'll enjoy the camaraderie that naturally occurs when people gather around good food and drink. Spending time with friends and having a good time makes life better.
Personally, I am excited to attend some of the wine tasting events Vinovest will be hosting in Napa/Sonoma in the future. Maybe we can do a get-together with the readers of the Financial Samurai newsletter.
For investors looking to add a unique asset class to their portfolio, Vinovest makes the process of investing in fine wine and whiskey accessible and simple. Register here to evaluate their contributions.
Readers, anyone a wine lover or whiskey grower? If so, I would like to know how you are pronounced and how you deal with drinking wine or whiskey or holding it for great benefits? Do you want to enjoy your investment more as you grow?
My Interview with Anthony Zhang, Founder of Vinovest
Originally, I just wanted to chat with Anthony on the Financial Samurai podcast. However, after listening to the episode, I became so interested in investing in wine and whiskey that I put together this post. Enjoy!
Show questions and notes:
How does an investor decide whether to enjoy a wine or whiskey investment or continue to hold?
What is the strategy for investing in wine and whiskey?
How do you generate cash flow for wine and whiskey investors?
What is the recommended distribution of wines and spirits?
What are the key changes affecting wine appreciation? (Consider factors such as scarcity, product equity, and age.)
What is the difference between investing in whiskey and wine?
How do you build Vinovest and get it off the ground?
What is the typical profile of a wine grower?
How does growing demand from China and India affect wine prices?
How did Japanese whiskey achieve such a strong brand value?
Can you share details about spinal cord injuries and what we should know about them?
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