Broker Check
Price of Wine

Price of Wine

May 11, 2020

I have always thought there were a lot of analogies between wine and investing. In one of my recent social media posts, “Why Some Wines Command a Hefty Price,” the author outlines some of variables that can influence the price of a given wine. The article focus on production costs like the cost of the land, aging barrels, labels, even the cork. But what it doesn’t mention is the process. The cost, process and time to make wine at home can be significantly different than the process used in a you may find in Napa or Bordeaux. A Certain grape or fermentation process can enable to the wine to “preform” differently in the bottle. Basically, allowing it to continue to mature as it ages. As a result, you often get a more refined end product as wine that has greater complexity which can result in a more enjoyable experience.

I acknowledge that comparing wine to investments like mutual funds or ETF may be a bit of an oversimplification. But there are some similarities here and are interesting to note. These investments do have some overhead. There are basic “costs of production” and that is part of the reason some investments have lower expenses. An ETF that attempts to shadow the S&P 500 may be less expensive to “build” that a fund constructed out of handpicked stocks from the emerging market sector. But then there is also the process. Some investments are very simple in nature and simply move with market valuations and momentum. Yet others are constantly rebalancing to help limit losses or reach for gains.

Whether it’s your investment portfolio or your wine portfolio a connoisseur will find value across many price points. And a thoughtful blend of your objectives and personal preferences can help lead you to desirable experience.

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