Investing in Wine Vs. Investing in Stocks – Which is Safer?

If you’re looking for viable investment opportunities then you’ve likely considered a range of potential investments, including stocks and wine. But of these two drastically different investment arenas, which is the safer option during the current economic climate?

In this article, discover the pros and cons of investing in wine and investing in stocks to help you make a more informed decision about which investment direction is best suited to you.

The pros of investing in wine

 

A low-risk investment

Fine wine is a physical asset, so it represents a very low-risk investment. When you invest in the market, your wines are stored in optimal conditions within a secure bonded warehouse.

Wine is a physical, tangible asset

Wine, unlike stocks, is a tangible asset created to be drunk and enjoyed. This gives it intrinsic value as a medium to long-term investment.

A relatively resilient marketplace  

According to S&P Global, wine is one of the few luxury assets to have withstood the harsh impact on assets triggered by the coronavirus pandemic, proving the market relatively resilient. Indeed, wine is widely considered to be a ‘safe haven asset’.

The cons of investing in wine

 

Portfolio valuation can be tricky

Traders tend to purchase and sell wine at a less frequent rate than stocks are purchased and sold, and there is no standardised international market. These factors can make it challenging for wine investors to get an accurate idea of the value behind the wines in their portfolio.

Selecting well-known wines could be disadvantageous

Many wine investors tend to choose mainstream wines from well-known wine regions such as California, Burgundy, or Bordeaux. Owing to their ubiquity, these wines can have a reduced chance of transitioning to rare wine status.

Selling wine can take a while

It can take wine investors some time to sell a bottle of wine in their portfolio, particularly when trying to navigate the marketplace without expert support. This can make it more difficult to access funds quickly should the need arise.

The pros of investing in stocks

 

The potential for large cash gains

Though the prices of individual stocks rise and fall daily, the potential to grow your money over time can be significant. Investing in stable companies that have the ability and intention to grow can often result in profit for investors.

Quick purchases and sales

Thanks to their liquidity, stocks can usually be bought and sold fairly quickly, and often at a fair price.

Diversification

The stock market gives investors the ability to build a diverse stock portfolio across a wide variety of different industries and sectors. This diversity can help to reduce the overall risk of stock investment.

The cons of investing in stocks

 

An erratic, volatile marketplace

Unlike the fine wine market, the stock market is a high-risk, erratic and volatile investment arena. Although stocks can be highly lucrative when invested in tactically and sensibly, the rapid, widespread price fluctuations can make it difficult to achieve the desirable returns on your investments.

Limited company information

It’s important to remember that when you invest in stocks you are investing in a public company. However, investors may not be able to access all relevant information about the company, which can make it more difficult to make good investment decisions.

Capital Gains Tax

If you make a profit on shares you sell, then you will likely have to pay Capital Gains Tax, depending on your total gains for the tax year.

However, it is worth noting that you do not have to pay Capital Gains Tax when you sell fine wine because the HMRC classes it as a ‘wasting asset’.

Wine Vs. stocks – which is the safer investment?

While the stock market represents a high-risk, high reward investment arena, investing in wine tends to offer more security – which is an important consideration if you want to create a sustainable investment portfolio.

Fine wine has a long, proven history of robust returns on investment. According to the world’s largest online wine stock exchange, Liv-ex, fine wine has delivered 13.6% annualized returns over the last 15 years – outperforming most stock markets. One need only review the Liv-ex fine wine indices to see how modest but consistent annual growth adds up over time.

So, in the case of wine vs. stocks, it is our opinion that wine is a much safer investment.

Talk to our wine investment experts

We hope you found this article helpful. If you’d like more information or advice about investing in wine, simply schedule a free 30-minute consultation with one of our wine investment experts.

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