Wine and Gold
Wine versus Gold; in the world of finance and investments, is it comparable? Despite the price fluctuations over the last few months, gold is still perceived as the ‘safe haven’. As investments in fine wine are relatively new, it is met with some reluctance, even from seasoned investors. More often than not, our newly interested account holders will ask “as an investment, can wine be compared to gold?”
Investing in Wine and Gold – What are the Similarities?
When dealing with gold in physical form, like wine it is a tangible asset. Unlike fine wine, gold does not need to be stored in a climate-controlled, professional storage facility. However, like your cases of fine wine, insurance is a must.
Furthermore, fine wine is categorized as a wasting asset. Due to the fact that wasting assets have a limited life span, one does not need to pay any tax on the profits derived therefrom. When investing in gold, the profits unfortunately, are subject to the usual taxation.
Investments in fine wine also show minimal risk for an alternative investment; picking the right stocks will hardly ever leave you holding a worthless case of wine a decade later. Due to the constant demand for these luxury wines coupled with the ever diminishing supply, these fine wines are in movement on a daily basis, in the global secondary wine market. On the other hand, the rarity factor does not come into play when dealing with gold investments.
The development of the global fine wine market over the past decades has shown stunning growth, and therefore liquidity is very high; perhaps not as high as the gold market, but it certainly outperforms other traditional investments such as real estate.
Wine versus Gold
Wine versus gold – the comparison itself may be absurd to some investors, as gold is perceived to be in a whole different league than fine wine. However, one fact that cannot be refuted is statistics.
Gold is commonly measured in ounces and US Dollars. Luxury wines, like the stock market can be measured with an index, to determine the performance of the entire market.
The Liv-Ex 100 (comparable to the German Share Index – DAX, or the Austrian Index – ATX) is the index for the top 100 blue-chip wines listed on the London based platform. Currently, Liv-Ex is the exclusive fine wine exchange, and therefore a good benchmark when dealing with these luxury goods.
Let us examine the performance of the Liv-Ex 100 and Gold, over the course of the last 12 years.
As one can clearly ascertain from the above graphs, both gold as well as fine wine has shown a positive growth curve over the past decade. Although gold may show the slightly higher rate of return, one must bear in mind that the value of gold is being compared to the entire fine wine index. And because the fine wine index contains the top 100 investment grade wines, stocks which are currently not performing well will plague the entire growth curve.
One can clearly see how the fine wine stock has outperformed gold significantly over the last decade.
Is Wine and Gold a Fair Comparison?
In terms of finance and investment potential the answer is a clear YES. In terms of investment popularity and awareness, sadly it is a NO. The market for gold is obviously far greater and more liquid than the fine wine market, but gold also had a significant head start, to amass that lead.
The most important aspect for investors is the returns. As one can conclude from the aforementioned graphs, there are definitely fine wine stocks that have outperformed gold in the financial playing field.
Take these facts into consideration when reviewing your investment portfolio. We are in no way advocating that gold is a weak investment; just that there are fine wines that check all the right boxes when it comes to investing and reaping the rewards. Just like gold, and in some cases even more fruitful. So before you allocate your entire investment capital into stocks, shares and real estate, contemplate diversifying a fraction in to luxury wines. Turning fine wine into liquid gold…
Bordeaux Traders - The Fine Wine Investment Brokerage GmbH
Mooslackengasse 17, 1190 Vienna
Phone: +43 676 490 51 19