Why I invested with Vinovest
Key Reasons: Portfolio Diversification, Fun, and Asset Insurance
Disclaimer: The content here is for informational purposes only and should not be taken as investment advice. All views contained herein are my own and do not represent the views of any other organization. Always consider your own risk tolerance when deciding where to invest your time and money.
Background
During the pandemic, I allocated a small percentage of my portfolio in cryptocurrency thinking that it was a good hedge against inflation. In 2021, this investment grew to be much larger than I was comfortable with, and I felt that it was time to risk-off and re-invest in some less risky assets like SPY/QQQ /other inflation hedges. That’s when I discovered Vinovest, an investment platform for fine wines. Eventually, after researching it and speaking with the very nice and professional Vinovest team, I was sold and parked some of my money in there for the long haul. So far, it’s been both interesting and fun, but I haven’t seen the prices “moon” yet :)
Truthfully, only time can tell if investing with Vinovest will pay off, but below I’ll share reasons why I think long-term investing in fine wine makes sense and why I decided to invest:
Why Wine Investing?
The fundamentals of investing in wine are based on what wine inherently is: A finite resource that has cultural value to its consumers as it ages.
To elaborate, there are three main reasons why wine is a suitable long-term investment:
- Scarcity: A limited number of bottles are produced from certain regions, vineyards, grapes, etc., which creates scarcity and limited supply
- Aging: Wine “ages” therefore increasing its value in the long run along with scarcity
- Brand Equity: Since wine is a luxury good, the wealthy’s lifestyle is generally not affected by a recession. This makes wine and most luxury brands useful recession-proof assets
How does wine compare to traditional investments?
There’s an index that tracks investable wines, called the LIV-EX. From the graphic below, the claim is that in 12–20 years, the fine wine index has outperformed many other indexes and investment vehicles.
Here’s their comparison to the S&P 500: Wine had a 2020% return compared to a 490% return of the S&P 500 👇
However, keep in mind that Vinovest does not necessarily track the index. According to their website, they use Data Scientists and Sommeliers to “pick stocks” for their clients’ portfolio (of wine). More on this later…
Why Vinovest? What are their fees?
Vinovest wants to be your trusted vault for your fine wine assets, and they have some things that drew me to consider them over continuing to manage my cryptocurrency. They currently charge between a 2–3% annual fee.
☝️ There are three main value-adds that I believe justify Vinovest’s annual management fee of >2% when I compared how I was doing with cryptocurrency:
- Full Insurance: All cryptocurrency is basically uninsured. If an exchange or wallet gets lost or hacked, then chances are quite high that you lose your coins/tokens for good. Not so with Vinovest, where assets (in theory) are covered by insurance whether they are lost due to worker malfeasance or weather conditions.
- Authenticity: One problem with wine investing is when wine fraud occurs. Vinovest claims that their wines are sourced from legit places and takes the guesswork out of it for you.
Unfortunately, cryptocurrency scams or rug pulls are also fairly common for newbies, akin to wine fraud.
- Perfectly Stored: Another problem with wine investing is when the wine goes bad due to poor storage conditions. Similarly, Vinovest claims that their wines are stored in facilities with the correct conditions for both aging and longevity.
What are the Risks of using Vinovest?
I can think of two major ones:
1. The risk of picking the wrong wines
Vinovest’s Council of wine advisors is comprised of both Data Scientists and Sommeliers. While this might seem perfectly safe, there can always be issues.
In a particularly recent example, Zillow became famous for having their AI technology pick the wrong house purchase prices and had to sell many at a loss:
That said, in fairness to Vinovest, they use well-qualified humans (sommeliers and other industry experts) to validate that their wine picks are good ones.
2. The risk of the company going under
Another major risk is that Vinovest is a very young company, perhaps three years old at most. According to Crunchbase, they are still in their Series A. Of course, the company going under or becoming insolvent would not be a great outcome for my investment choice’s longevity.
Ideally, if that happened years from now, I would be able to retrieve my wine from storage, 🍷 drink to my sorrows with some of it, and eventually find a buyer for them to recoup my initial investment.
Conclusions
My decision to invest in fine wine was to seek diversification with an uncorrelated asset and have fun, rather than to maximize my gains, and so far it has been very fun and rewarding. Additionally, I’ve only had great experiences with the team there and everyone I spoke with on the phone seem genuinely passionate about the platform, their work, and the product. I hope they succeed!
As another benefit, I rest much easier at night knowing that fine wine can’t be hacked or stolen 😺 If you have questions for me, feel free to leave your note in the comments section :)
12/26 UPDATE: Check out this Reddit post. The guy had decent results after buying in October 2020: https://www.reddit.com/r/WineEP/comments/qdqrxm/vinovest_review_after_one_year/
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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
