Pensions, ISAs and life insurance are all fine ways to save money but they hardly make good dinner party conversation. So it is of little surprise that risk-taking bon-viveurs are looking for classier alternatives. And what can be more glamorous and decadent than spending your hard earned cash on a few crates of wine - which you don't even intend to drink.
The good news is that investing in your favourite plonk can generate some salivating returns. Well known wine merchant Berry Bros reckons wine generates on average an 8% to 12% compound interest per annum.
And it is not even a preserve of the well-heeled - you don't have to be a millionaire to start up your own cellar. A number of specialist Independent Financial Advisers (IFAs) have started offering wine investment to their clients to cater for this growing market and it is better to contact one of these rather than going to a wine dealer direct. Wine investment remains an unregulated activity and unless you're a true wine buff it can be difficult to pick out the winners.
Avoiding temptation
To make the best of your investment, don't keep your wine at home. The temptation to dip into your collection when you have friends round for dinner is just too great. Most people will keep their wine 'in bond', which means it is stored in a warehouse and looked after by a specialist wine broker. You will need to set up an account and pay an annual storage fee of around £10 per case. Ask for a certificate to show your wine is in a bonded warehouse as this will increase the value of the wine and will enable you to avoid paying duty and VAT.
Wine investment qualifies as 'wasting chattel', meaning that profits are not subject to Capital Gains Tax. However, if the Inland Revenue decides wine may improve in value after 50 years, it can lose this status.
In need of a stiff drink?
With global stock markets going into freefall, investing in wine can seem to be an attractive alternative. But is it really worthwhile? Some experts reckon it is a no-brainer. Fine wine benefits from being stable, easily realisable, consumable and portable. It is in increasing demand because of its decreasing availability. Wine is also largely unaffected by recessions, interest rate changes and stock market fluctuations.
According to Premier Cru Fine Wine Investments, £10,000 invested in fine wine in January 1990 would be worth almost £90,000 in January 2006. The same sum invested in the FTSE All Share Index would be worth only £39,145.
But as with all investments, the wine market does not come without risks. It is not for the impatient. Any investment in wine has to be made for the long term - some say for a minimum of ten years. It has also been advised that it should represent just 5% of an investment portfolio. Then there is the risk that you will be sold a dud.
If you're worried about scams, check out the website www.investdrinks.org, which is dedicated to showing the dangers of drinks investment. Get in touch with an investments advisor first for more information.
Provided you are aware of the risks, wine can make an interesting investment. The worst that can happen is that it will dive in value, in which case you could always drink it.
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