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Fine Wine Portfolio - Objectives

Updated: Apr 11

Since ages wine has been a way of life for many and over many years has become more valuable as it has been giving a good return on investment and today has come to mitigate risk in the form of fine wine investments.

I often come across people who ask me why should they invest in wines, what is the objective behind holding a portfolio of wines, what is the philosophy behind trading and not just enjoying drinking these wines and I'd simply say because one should never put all eggs in one basket. Today all financial advisers advice their clients to diversify their portfolio by investing into alternate assets because of market volatility, uncertain global economy, low interest rates. Traditional markets have become unattractive and therefore investment experts are looking into alternative investments so as to hedge risk.

Fine wine performance is relatively uncorrelated to equity markets, a sovereign default would not alter any of these traits. Because of their limited supply, desirability, durability and stability and the independence of their price from stock market prices they can add genuine diversity to an asset portfolio.

Holding a fine wine portfolio is expected to show lower volatility of returns compared with a 100% equity-based portfolio. In the present conditions the performance of marketable securities is considered volatile and thus I believe that investing in alternative assets can offer some stability in both the short term and long term.

Since the fundamentals of fine wine investing depends on two factors supply and demand, as fine wine matures and ages it becomes more valuable. Thus we understand there is always a finite supply of these assets and there is no income stream and therefore no income tax liability. Profit on fine wine investment is not liable to Capital Gains Taxes.

In the year 2017 fine wine outperformed the FTSE and gold and Knight Frank luxury investment Index report has it that wine has super seeded the classic car market with a growth of about 241% in the last 10 years. The Fine Wine Investment (FWI) market is an alternative asset class that has shown an average CAGR of 12.9% over a 10 year period, outperforming most major asset classes. With over $6 billion a year the fine wine sector is more and more considered as a genuine alternative asset class, providing significant diversification benefits from mainstream financial markets.

Wine Equation in partnership with Cult Wines is offering Fine Wine Investments. For more information please write to namratha@wine-equation.com

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