Wine and Stock Markets
Can one compare investments in luxury fine wines against stock market investments?
Absolutely not. Investing in stocks and shares are traditional investments in a highly liquid market, whereas fine wines are a completely new form of alternative investment, or? Incorrect again.
Fact remains that traditional investments like stocks, shares and bonds are traded in a much more liquid market than alternative investments like wine or oil. Nevertheless, we will now demonstrate how investors can achieve significantly higher returns, using the right investment strategy when dealing with fine wines.
Is fine wine comparable to stock market investments?
An investment in luxury wine is an alternative value investment, and similar to real estate, a tangible asset. Stocks and shares are the tried and tested, familiar investments which cannot be compared to fine wines.
However, as with stocks and shares, in the fine wine market there are so-called blue-chip investments. Blue-chip wines, just like blue-chip stocks, are known to yield safe and consistent returns on investment.
The primary difference lies in the fact that investors dabbling in stocks and shares will also receive dividends, which is not customary when investing in premier wines. On the other hand, all profits obtained from fine wine investments are completely tax free*, void of capital gains tax and not subject to other hidden fees or financial forfeits.
Comparison with the Stock Market Index
In recent years, the world famous index for blue-chip wines, Liv-Ex 100, has set the bar extremely high. Following, is a direct comparison of the Liv-Ex 100 index against some of the world’s strongest stock market indices.
First up, the Dow Jones; as the most well-known stock market index in the world, it tracks the financial movement of the 30 largest companies in the American market.
For the second comparison we will analyze the DAX; the German stock market index. The DAX is also a prominent index in the global financial market, the biggest one in Germany, and consequently the most significant index in the German-speaking region.
Third and last is the BSE Sensex, the Bombay Stock Exchange Sensitivity Index. The Sensex is the most important index in India, and amongst the top indices in Asia. Similar to the Dow Jones, it lists the 30 most established corporations traded in the Indian market.
The following graphs detail the price fluctuations of the aforementioned indices, compared against the Liv-Ex 100, over the course of the last 12 years.
Can Fine Wine Match the Profitability of the Stock Markets?
As clearly demonstrated in the above graphs, the answer is YES. The Liv-Ex 100 has matched and exceeded the Dow Jones and DAX indices by a significant margin. The BSE Sensex on the other hand, is the most superior index of the lot, even though it is known to be a highly volatile index. As one can see, financially stricken markets and struggling economies tend to increase the volatility of global indices. The Liv-Ex 100 however, portrays relatively stable and consistent growth over the last decade; a fact that has not gone unnoticed by some of the largest investment companies and financial firms in the world.
Bordeaux Traders - The Fine Wine Investment Brokerage GmbH
Mooslackengasse 17, 1190 Vienna
Phone: +43 676 490 51 19