By Ellie Reilly
The classic picture of an investor is a middle-aged man in an expensive but windswept suit. He’s walking quickly down the streets of a major city barking orders into his cutting edge phone with a briefcase in his other hand. Most likely he’s trading stocks of some kind, but he could be dealing in futures or hounding a startup that he helped fund.
Well it’s time for these shareholders to make way. A new kind of investor is entering the fray as millennials are breaking into the market for wine investing. A new generation and new trends in wine-buying have made investing in wine more popular than ever. Here’s the skinny on this new trend.
Millennials Love Wine
To millennials (and anyone else who’s looked at the data), it’s no surprise that we love wine. Now that the youngest millennials are of legal age in the United States, data from the Wine Market Council’s 2015 study shows that we’re drinking 42 percent of the country’s wine. That’s more than any other generation, including baby boomers.
Experts seem baffled as to why millennials are drinking so much, but to most of us it’s pretty clear that we love wine because we’re stressed as hell. That’s definitely why millennials are drinking wine, but why are we so keen on collecting it too? We’re not just running out for a cheap box (hey, I get the fancy box). In 2015, 17 percent of millennials spent $20 or more on a bottle of wine. Compare that to 5 percent of baby boomers who are, by far, the wealthier generation.
My theory is that millennials don’t just want a throwaway box of wine. We want something memorable. It’s well-known that millennials are big on authentic experiences. When it comes to wine investing, this plays out in two ways. First, if we’re going to put our money into anything, it’s not going to be intangible shares in some generic corporation. We want to put our economic weight into things that can create experiences.
Second, we don’t buy wine just for one predictable tasting experience after another. I don’t particularly remember the last glass of Franzia that I had, but you can bet that I remember the $80 2013 red blend from France that I shared with my partner. That’s an experience that I’m never going to have again in exactly the same way, and that’s what makes it great.
Finally, it makes sense for millennials to start investing in things now. In the United States, capital gains tax tracks your income, so the best time to start thinking about investing is while we’re young and in the lowest income bracket of our lives.
All these factors taken together make for a perfect storm when it comes to millennials and investing in wine. We love wine, we love unique wines, and we’re in a prime time to think about where we want to put our money. But how does wine investing work, exactly? Let’s take a look.
What’s Up With Wine Investing
Investing in just about anything usually works like this: you put your money in when that thing is cheap and then, after some time, you get back more money than you put in. Of course, this only works with stuff that goes up in value over time. Businesses are hit or miss. Sometimes they start off small and end up doing really well, but other times you put your money in and then never get it back.
On the other hand, collectables, if they’re taken care of, will usually just go up in value. Good wine is exactly like this. Everybody knows that good wines change in flavor when they age, usually for the better. If you’re like me, you’ve probably read stories about 50+ year-old bottles getting opened and everybody in the room sharing a taste. Experiences like these only happen once and only after significant amount of time. That’s what makes them so valuable.
Not every wine ages well, though. Only about one percent of wine is meant to be aged. The rest will either do nothing or turn sour if stored for more than a few years. Here’s an intuitive rule of thumb for aging wines: more expensive wines, the kind that millennials are buying more than any other generation, will typically get better with age, while cheaper wines will not. So don’t bother hanging on to that box for very long.
How it works, then, is that you buy a good wine early in its lifespan, store it in a cool, dark place, and then, once it’s aged enough, you either sell it for a good price or drink it and take the unique experience for yourself.
The Dark Side of Wine Investing
Unfortunately, the world of wine investing has its dark corners. As with just about anything that involves serious money, fraud is not uncommon in wine collecting. It turns out that it’s tough to keep track of really, really old wines. Some stuff has turned up that’s allegedly from the cellars of famous figures like Thomas Jefferson, supposedly lost to time . . . until now. Unfortunately, a lot of this stuff is fake. And it’s not just the super high profile bottles. Even wines from the early 1990s or early 2000s can be faked and put up for auction for a few hundred bucks.
It’s hard to spot fake wines, but it’s certainly not impossible and there are steps to be taken. In general, wines should look their age. So that brand spanking new cork on a bottle of 1977 Napa Valley? Probably a fake. A label that looks like it was printed yesterday? I don’t think so.
Keeping out the really convincing fakes means keeping auctioneers and brokers honest. As you might imagine, warning signs of more conventional fraud apply here as well. A paper trail is always good, and there better be a very good reason if there isn’t one. Brokers usually represent the reputation of their agencies, so it’s a good idea to buy from well-established sellers. It’s unlikely that a total newbie has stumbled upon an incredible century-old bottle of wine.
Wine investing is the perfect match for millennials who are looking for unique experiences, authentic collections, and a good place to put their money that doesn’t involve a soulless corporation. It’s no wonder that wine is catching on with our age group, in more ways than one.
Ellie Reilly is a freelance writer, millennial, and outdoors enthusiast. She loves wine, Netflix documentaries about wine, and dreaming about having enough money to buy really cool wines. Her poisons are an off-dry Riesling, a fruity red blend, and a cool Rosé.