Disadvantages

Investing in fine wine has the following disadvantages:

• Risk of Loss:  As with any asset, the price of fine wine can go down as well as up, so risk of loss is always possible. However, fine wine has historically produced returns that are much less volatile than the stock market.

• Less Liquid Market:  The fine wine market is less liquid than the stock and bond markets. Thus, it may be more difficult to quickly sell fine wine investments. However, with the establishment of the Liv-ex fine wine exchange in 1999, the fine wine market has become much more liquid.

• Spoilage, Damage or Theft:  As a tangible and consumable asset, fine wine is subject to spoilage, damage and theft. However, by obtaining insurance at replacement value, an investor can effectively eliminate this risk.

• Less Transparent Market:  The fine wine investment market is less transparent and regulated as compared to the stock and bond markets.

• Currency Risk (US Investors):  The purchase and sale of fine wine in the UK and Europe carries currency risk for US investors.

• Higher Transaction Costs: The transaction costs associated with the purchase, storage and sale of fine wine tend to be higher when compared to the transaction costs associated with other investments such as stocks and bonds.