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Exploring fine wine as an investment

Jul 23, 2024 | RBC Wealth Management


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Investing in fine wine may be an idea you’re exploring. Learn more about factors to consider in the current Investor’s Edge newsletter.

Wine glass in front of wine rack

Investing in fine wines is an option that many people have not considered. However, in today’s world, a growing number of individuals are seizing this opportunity. Investing in bottles of wine, wine stocks or wine platforms are options to consider.

Factors such as vineyard reputation, vintage quality and market demand play crucial roles in determining the investment potential of wine. As with any investment, thorough research and a long-term perspective are essential for success.

Results take time, like aging wine

Investing in fine wines is not a get-rich-quick opportunity. Wines take years to mature and reach an age where they are highly sought after. Over time, fine wines can be a reputable investment. However, like all alternate investments, these fine wines should only represent a small share of your overall portfolio. Additionally, they should fit within the context of a person’s overall asset mix.

As with any investment decision, it’s important to weigh the pros and cons ahead of time. Here are some insights for investing in the wine industry.

Advantages

  • Diversification — Investing in wine can be advantageous as it is a tangible asset with a low correlation to the price movements of stocks and bonds. Allocating funds to wine may help reduce the impact of market volatility and interest rate changes on your portfolio.
  • Intrinsic value — As a tangible asset, if a bottle of wine does not perform well as an investment, you can still enjoy your prized pinot noir—or share it with some lucky dinner guests.
  • Personal value — You can proudly showcase your wine cellar to fellow enthusiasts, enhancing your home’s appeal to potential buyers.

Disadvantages

  • Expense — Building, stocking and maintaining a wine cellar can be a costly endeavor. Also, experience, knowledge and research into wine selection are necessary to avoid making costly mistakes.
  • Time — Patience is necessary. Just like fine wine improves with age, you need to wait until your wine reaches its full potential before selling it. Keep in mind that wine can be difficult to sell because there is no secondary market for it. You may have trouble finding a buyer and negotiating a fair price.

For investing in wine, patience is key. Expect a holding period of at least 10 years, especially when choosing a fine wine that improves with age. Seek the guidance of a professional buyer and consult your financial advisor.

Read more in the Q3 2024 edition of the Investor's Edge >

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Wealth planning

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Disclosures

The information contained herein is based on sources believed to be reliable, but its accuracy cannot be guaranteed. The articles and opinions in this advertisement are for general information only and are not intended to provide specific advice or recommendations for any individual. Published on July 23, 2024.

RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in consultation with your independent tax or legal advisor. No information, including but not limited to written materials, provided by RBC WM should be construed as legal, accounting or tax advice.
 

Michael Blockhus, NMLS # 1877081 through City National Bank, may receive compensation from RBC Wealth Management for referring customers to City National Bank. Banking products and services are offered or issued by City National Bank, an affiliate of RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC and are subject to City National Banks terms and conditions. Products and services offered through City National Bank are not insured by SIPC. City National Bank Member FDIC.

Investment products offered through RBC Wealth Management are not FDIC insured, are not guaranteed by City National Bank and may lose value.