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Thursday, December 24, 2015

Buying Bordeaux Through Futures

The savvy investors are always on the lookout for opportunities to expand their holdings. One of the newest and most intriguing methods of expansion is little known outside of professional circles. Buying wine futures is a process in which investors purchase amounts of wine before it has been offered for sale by a vineyard. It is a speculative venture because before it has been tasted and valued, no one knows how much it might be worth.

The Virtuous Investor

Investing in wine futures is not for everyone. It takes a skilled communicator to negotiate with a broker for the price of a consumable product that fluctuates in value. Determining a fair price for the future value of wine is not a perfect science. Tasters meet in the spring before the wine has even finished curing. Investors must evaluate the opinions of tasters who are judging last season's harvest in order to decide whether to invest in new product. Those investors who become familiar with the products before investing will gain a sense of how prices change yearly.

Patience is a virtue that you as an investor must possess to succeed in wine futures. Buying "en primeur" is a high-stakes process that should not be taken lightly, since it can anywhere from two to ten years for wine to "age" enough to sell and make a profit. Knowing someone who is established in the business can help the new investor to gain confidence in the business and also serves another purpose, since established brokers often have access to higher quality wine.

When purchasing wine, you will be buying a portion of the harvest, known as tranches. A tranche is 50 cases of wine; once one tranche is sold, the remaining cases are sold at a higher price; therefore, speed is a valued trait for any buyer.

Making a profit off of wine futures can be accomplished in one of two ways. Investors can either sell their product immediately after it becomes available or in the future. With a good batch, investors can expect to capitalize on their purchase by selling the wine to collectors or investors immediately after it becomes available and it still holds its recognized value. Of course, waiting for the wine to age can also be profitable, since demand fluctuates and you are likely to get more for an older wine that has re-emerged than one that is fresh off the boat.

Buying wine futures began in France's Bordeaux region, but investors can get in on the action anywhere there is an interest. The highly speculative market is considered high-risk because it involves purchasing a consumable product that fluctuates in quality on a yearly basis. But if done correctly, and with a little bit of luck, wine futures can be a highly profitable area of investment.

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