Watch expenses like a hawk

The cost of wine investment is significant:

• Buying wine. When you buy wine you pay your state tax. This can vary from 0% to 8%. If you buy your wine at auction, you will pay the buyers’ commission which can vary from 3% to 18%. If you are buying wine over the internet, you pay the shipping costs which vary greatly from $10/case to $60/case. These are significant costs.
• Storing wine. For a wine investment you must store your wine in a wine cellar, so that you can truthfully claim impeccable provenance. If you buy the cellar you can pay $400 to $3,000 for a mail order cellar and many thousands for a custom built cellar. Alternatively you can use a wine storage facility and pay around $1.50/case.
• Selling wine. The wine must be shipped or taken to the auction house or the online auction house. For the great majority of us who do not live in the state of New York or in California, it is the former. The most normal way to sell is either by auction house or a wine buyer will pay for it directly. In either case you are paying about 18%.
• Tax. Like any other appreciated asset, Uncle Sam will take his bite. Appreciated wine is treated like a Collectible capital gain. So the Winevestor will pay a further 28% at tax time. In England wine is a more attractive investment as it can usually be designated as a ‘wasting asset’ and therefore not be taxed.

There are strategies in most of these areas to keep costs down and hence the overall rate of return up. Compare these costs to other investments and they are high. A mutual fund can be bought with no transaction costs, incur no storage costs, there are no selling transaction costs and the tax cost is the same.