TITLE

Wine: The Illiquid Liquid Investment Asset

AUTHOR(S)
Coffman, Brett A.; Nance, Robert J.
PUB. DATE
December 2009
SOURCE
Journal of Financial Planning;Dec2009, Vol. 22 Issue 12, p61
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
As a result of decreasing risk premiums on equity investments, alternative investments have increased in desirability. Wine has been an investment asset with significant history in Europe. In the United States, it is beginning to emerge as a viable investment for affluent clients. To guide clients through the process of investing in this asset class, financial advisers should be able to differentiate investment-grade wines, understand the importance of the cellar log to ensure that wine has been properly stored and transported, be able to work with reputable vendors to avoid counterfeits, and understand various markets for wine, in addition to different ways to invest, typical fee structures, effect on overall portfolios, and the regulatory environment. A financial planner picking a stock will likely be looking at factors such as price-earnings, price-book, dividend yield, past earnings growth history, management team background, debt to equity, earnings growth, etc. Wine investment decisions are based on a completely different set of factors, such as: the region where the wine was produced, the winery, when it was produced, vintage rating given by key critics, weather patterns when the grapes were grown, how the wine has been stored, condition of the bottles, and prices compared to past vintages. Like gold or oil, wine is an alternative investment. It is a hard asset uncorrelated to the equities markets, with strong historical returns and a low standard deviation. There are increasing opportunities for clients to add wine to their portfolios to decrease volatility and increase the likelihood of strong long-term investment performance.
ACCESSION #
46794665

 

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