01 Mar

Investment wine

Most of us cannot play in the game of “treasure assets”—investments in highly collectable luxury items such as classic cars, fine art, jewelry, antiques, vintage watches, and wine.

It would be nice if we could because treasure assets deliver extraordinary returns, far outdistancing mundane money makers.

The treasure asset that performs best? Wine. The contest is not even close. In the past 22 years, the Dow Jones average rose in value 873 percent, the FTSE (London exchange index) 288 percent, gold 160 percent, wine 1,829 percent.

Investment-grade wine comes almost exclusively from Bordeaux—Lafite Rothschild, Mouton Rothschild, Margaux are among most recognizable. Add Burgundy’s Domaine de la Romanee-Conti, the world’s most expensive wine.

In a 10-year study, the average appreciation in investment-grade wine increased 235 percent, classic cars 194 percent, fine art 131 percent. By comparison, the FTSE managed 78 percent.

All treasure assets have a yearly cost—classic cars cost more than $35,000 a year to maintain and store. You can store treasure wine assets in your cellar for basically nothing, and you have a state-of-the-art cellar if you play in this league.

Finally, wine is a liquid asset in more ways than one. Sales of other assets often require an auction house that will take around 20 percent. Wine can be sold for about a two percent transaction fee, and since individual bottles can be had for four-or-five figures, the buying pool is huge. The other assets often require a six, seven, or eight-figure investment, thus a much smaller pool of buyers.

Takeaway: If you have the money, invest in treasure wine assets. The rest of us can only dream.

Fine wine prices:
• Three bottles of Château Lafite 1869 sold for $230,000 each in 2010.

• Bottles of Domaine de la Romanee-Conti 1990 sell for around $20,000 each.

• Château Margaux 2009 in a Balthazar bottle (12 liters=16 standard bottles) sells for $195,000 retail, but only three of the production of six are for sale (at Dubai International Airport).

Last round: How much do you spend on a glass of wine? Five minutes after a bad day. Longer when things have gone well and there is good conversation and cheese to go with it.