While I personally think wine is a terrible choice for an investment vehicle, I’m at odds with a lot of people with more money than sense who choose to diversify their investments to include fine wine. However, it may not be the best kind of diversification:
The search for safe investments and risk hedging has apparently led some in recent years to start investing in fine wines. “In the past, one of the attractions of fine wine as an asset was its non-correlation with mainstream financial markets,” wrote the Financial Times‘ John Stimfig in 2009. “This provided investors with valuable portfolio diversification.” What could be less closely linked to the Fed funds rate than whether or not it was a good year for Bordeaux? But now the FT reports that a new paper by two IMF economists, Serhan Cevik and Tahsin Saadi Sedik, says that if this were ever true, it’s not anymore. Fine wine prices are just like oil, they find: they go up or down depending on how the rest of the economy is doing.
