Money Rehab with Nicole Lapin - How To MAKE Money on Wine

Episode Date: June 10, 2024

Yes, you can make money from wine as an investor— but you can't just choose an investment-worthy vino based on the art on the bottle (but if that's how you choose the wine you drink, well, same). Nicole explains the two ways you can invest in wine, and how to set yourself up for success.

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To get started, visit bofa.com slash newprosmedia. That's B-O-F-A dot com slash N-E-W pros, P-R-O-S, media. Bofa. com slash new pros media. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. If you did dry January this year, you definitely noticed how hitting pause on alcohol spending can save you a whole lot of money. But it can also make you a lot of money from buying wine as an investor. If it sounds too good to be true, it can be. Wine investing isn't just about buying a few bottles, crossing your fingers, and hoping that one of them increases in value. Success here, like any type of investing, means being strategic. And before I dig into this strategy, I gotta state the obvious.

Wine investing should not be your first and only investment. If you are deciding between investing in S&P 500 index funds and wine, please do the S&P. And that is a much more straightforward investment and one that won't break if you drop it. Similar to other commodities like gold, you can invest in wine in two ways. You can buy the asset itself, so bottles, or you can invest in a public company that produces the commodity, like publicly traded wine producers or vineyards. Let's assume your investment strategy is buying bottles on bottles. If you're buying wine as an investment, you want to think about it like buying a stock. The goal is to buy low and sell high. For stocks, when you're trying to figure out whether a company is a good investment,

you'll do some research, of course, to see if there's reason to believe the value will go up over time. With wine, the principle is the same, but what that actually looks like in practice is a whole lot different. For a bottle of wine to go up in value, one of three things needs to happen. Either the wine gets better as it ages, something external happens that makes the wine more desirable like Brad Pitt and Angelina Jolie buy a vineyard, true story, or there's something that limits the supply and then supply and demand does its thing. When I say limited supply, I mean that the bottle is really rare or the vineyard that makes that wine stops producing that particular blend, something like that. When supply goes down, the price goes up. The most expensive bottle of wine ever sold exemplifies all three of these qualities. It was a bottle of Domaine de la Romanie Conti. This bottle was sold at auction for $558,000.

The reason this wine was so highly valued was that this particular bottle was made by a very fancy vineyard known for very fancy wines based in Burgundy. And this particular bottle was made by a very fancy vineyard known for very fancy wines based in Burgundy. And this particular vintage was extremely rare. The bottle was made in 1945. And because of World War II, very little wine was made that year. So let's recap how this checked all three boxes. The vineyard is known for making delicious wine that ages with time. There was an external event that made the wine more desirable, the fact that its creation was affected by World War II, which was a draw for history buffs, and there was limited supply. All of that adds up to $558,000 apparently.

Now, you might have great taste in wine, like you always bring the best bottle to dinner parties. But as an investor, the secret is about finding out what the market will pay for, not what pairs well with steak or chocolate. Thankfully, you don't have to figure this out solo. You have a guide, the London International Vintners Exchange, Livex, to her friends. Livex is a wine exchange that uses their sales data to create a number of indexes. These indexes track everything from the top 50 most frequently traded white wines to the price of the most actively traded reds and everything in between. There are other indexes as well. The Sotheby's Wine Index is another popular one.

These indexes will be your investing roadmap to guide you through market trends and also help you score the bottles that could mature into treasure instead of vinegar. We've talked about what's happening inside the bottle, but let's take a look at what's going on outside. And no, I'm not talking about the art on the label because even though that's how I pick some bottles of wine, it's not the best way to figure out which one's a good investment. When we talk about what's happening outside the wine, we're actually talking about storage. You can't just stick your investment grade bottle in your basement. Proper storage will help your bottle mature into an investment worthy vino, but only under the right conditions.

So that means correct storage conditions can actually make the wine more valuable and incorrect conditions can do the opposite. Wine should be stored in a controlled environment with the right temperature, the right humidity and minimal light exposure. Obviously, not everyone has those conditions at home, and if you're looking to buy something like that, that can get really expensive. You're dropping a couple thousand bucks, at least. So many investors prefer the VIP treatment and choose those professional wine storage facilities for perfect conditions. A wine storage history can make a big difference in its resale value.

So maintaining meticulous records of how it's being kept safe is best practice for turning wine into cash. Plus, if your wine ends up having historical value like the 1945 bottle of Roman and Conti, you'll also want docs backing up where it was made and when. All right, let's talk about the other way to invest in wine. Putting your money into the industry or a company rather than a specific bottle. A number of wineries are publicly traded, like Constellation Brands with the ticker symbol STZ, which actually acquired Empathy Wines, a company founded by none other than recent

money rehab guest Gary Vee. LVMH, ticker LVMUI, offers some exposure to Veuve Clicquot and Moet, in addition to some other luxury brands for extra diversification like Louis Vuitton and Tiffany & Co. Beyond that, there are even companies that will let you invest in bottles of wine as part of a group rather than buying them yourself. One popular one is an app called Vint. You can also invest in wine futures, which is essentially investing based on wine before it's bottled, based on the price you think the wine will be valued at in the future. You can do this IRL at a wine auction or a tasting event or URL by apps that facilitate wine investing like VinoVest. Investing in any kind of futures is called derivatives investing,

and that is riskier than just your beginning level investing. So keep in mind that you'll want to proceed with caution. And if you do invest your money, you're also going to want to invest your time in becoming an expert in that type of investing. For today's tip, you can take straight to the bank. If you're looking to start doing some research or even some taste testing, the two wines leading the market are Champagne and Burgundy. Investment-grade Burgundy has appreciated on average 37.5% year-over-year, and investment-grade Champagne has actually reached 42.7% year-over-year. Cheers to that. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is

Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.