It’s important, when you’re learning this market, to understand that there are hidden costs beyond the wine’s purchase price. There’s sales tax (which ranges from none in Delaware and Montana to more than 8 percent in New York and Tennessee) and, if you buy at auction, a commission to the auction house. Then you have to pay for storage. Renting a professional space that provides the right conditions costs about $20 a month for 10 to 12 cases and heads upward from there.
When investing in wine herself, Feely requires proof of provenance—a paper trail documenting who owned the wine for how long and how it got from place to place. For older wines, she may also request photos of the storage room and the cooling unit, as well as a monthly record of the room temperature. Finally, she prefers to buy wines by the case (12 bottles), and for Bordeaux in particular, she looks for the letters OWC, an indication that the wine is in its original wood case.
You may also need to take out a homeowners’ insurance rider—-essentially a supplemental policy—to protect your investment against losses due to storage problems. (You need a homeowners’ policy even if the wine is not stored at home; your insurance company can advise you.)
IF YOU WANT TO INVEST IN ART
Of all the dream investments, art is the most democratic. “Whatever your budget,” says Alan Bamberger, author of The Art of Buying Art, “you’ll find something to buy.” In fact, there are better returns on lower-priced works of art than on those that go for seven figures, according to the Mei Moses Repeat Sale Database. For example, art in the $5,000-to-$50,000 range produced an average annual return of 8.5 percent through 2010. Works priced from $50,000 to $1 million produced 6.9 percent, and those over $1 million, 4.4 percent. (Find more about the performance of art as an investment at artasanasset.com.)
Tempting as it may be to believe the pitch, avoid galleries that hawk so-called great investments, like Picasso prints, because of huge markups (sometimes as much as 90 percent of what you pay). Instead, start with work you like; art is fairly illiquid, so you may end up admiring it over your couch for a long time. Narrow your choices by examining the artist’s résumé, generally available at any gallery where his or her work is sold. Be wary of artists featured solely in international collections. Ask: Whose collections? When and where were the shows? Are the galleries reputable and established? Also watch for gaps in productivity. “You want to be sure the artist is in it for the long haul rather than dabbling,” says Bamberger. “A large body of work tends to produce better sales because a gallery is more interested in promoting an artist with 500 works than one with five.”
Hit the Internet to gauge the price range of the artist’s work, then use that information to negotiate with galleries and dealers. And when you’re starting, avoid auctions, where you’ll be competing against professionals. “Until you’re educated,” Bamberger says, “it’s like stepping into the ring with a pro fighter when all you’ve done is watch boxers on TV.”