Comparing Fine Wine to Other Investments

When compared to other commodities and financial markets, fine wine has shown competitive returns with lower volatility:

Comparison with Other Assets (2002 to Present): 

Analysis of Total Performance and CAGR

Cumulative Return (%)

• Liv-ex 100 has a cumulative return of 244.3%, placing it ahead of FTSE (86.9%), Oil (141.5%), DXY (19.7%), and Diageo (136.0%). However, it trails behind ES! (400.5%) and Gold (488.9%), which have seen higher growth over the period.
• Liv-ex 100 offers a strong return, particularly compared to more traditional indices like FTSE and DXY, showing solid growth in the fine wine market.

Annualized Return (%) / CAGR (%)

• Liv-ex 100's annualized return and CAGR are 6.4%, outperforming FTSE (3.2%), Oil (4.5%), DXY (0.9%), and Diageo (4.4%). While ES! (8.4%) and Gold (9.3%) offer higher growth rates, they come with more volatility.
• The 6.4% CAGR of Liv-ex 100 represents stable, sustained growth, making it a strong long-term performer, especially when considering its risk profile.

Volatility (%)

• Liv-ex 100 has a volatility of 37.9%, which is significantly lower than Oil (177.4%), Gold (76.5%), Diageo (78.2%), ES! (68.3%), and FTSE (58.6%). Only DXY (34.7%) has a slightly lower volatility, but with much lower returns.
• This lower volatility highlights Liv-ex 100's strength as a more stable investment compared to assets like Oil and Gold, which have much larger price fluctuations

Sharpe Ratio

• Liv-ex 100 has the highest Sharpe Ratio of 3.5, indicating the best risk-adjusted return among the assets. In comparison, ES! and Gold have Sharpe ratios of 2.7, while FTSE and Oil are at 1.4, and DXY lags behind at 0.7.
• The high Sharpe Ratio shows that Liv-ex 100 delivers superior returns relative to its risk, making it an attractive option for investors seeking stable, risk-adjusted growth.

Conclusion: Liv-ex 100's Strengths

• Liv-ex 100 stands out for its balance of strong cumulative and annualized returns with relatively low volatility, especially compared to high-risk assets like Oil and Gold. Its high Sharpe Ratio further underscores its strength in offering the best risk-adjusted returns. For investors looking for a combination of growth and stability, Liv-ex 100 presents a compelling choice over traditional and riskier assets.

The Sharpe Ratio is a financial metric used to evaluate the risk-adjusted return of an investment or portfolio. 

Volatility refers to the degree of variation in the price of a financial instrument over time. It is often used as a measure of the risk associated with an asset's price movements.

Risk vs Return: Annualized Return vs Volatility

The Risk vs Return graph highlights Liv Ex 100 as a strong performer, delivering a 6.4% annualized return with relatively low volatility (37.9%). Compared to higher-risk assets like Oil, Gold, and ES!, which have greater volatility, Liv Ex 100 offers a more stable investment with competitive returns. Its strength lies in balancing strong returns with lower risk, making it an appealing option for investors seeking growth with moderate volatility. 

Fine wine's unique position as a tangible, scarce asset with consistent demand makes it a valuable addition to a diversified investment portfolio. Its lower volatility and strong performance over time offer a compelling case for investors seeking stability and growth.

Cumulative Return Comparison

The Cumulative Return Comparison chart highlights that Liv Ex 100 has a cumulative return of 244.3%, placing it behind ES! (400.5%) and Gold (488.9%), but significantly outperforming other traditional assets like FTSE (86.9%) and DXY (19.7%). 

Liv Ex 100's strength lies in its ability to generate strong returns while maintaining lower volatility compared to highly fluctuating assets like Oil (141.5% cumulative return, but with extreme volatility). Its return is solid, and it offers a more stable investment choice than many high-risk, high-reward options, positioning it as an attractive middle ground for investors seeking both growth and risk moderation.   

Conclusion 

Fine wine investment provides a unique opportunity for diversification, offering high returns with lower risk compared to conventional markets. With its proven track record, limited supply, and increasing global demand, fine wine is positioned to remain a robust and attractive asset class. By carefully selecting investment-grade wines, utilizing proper storage solutions, and understanding the market dynamics, investors can enjoy the potential of fine wine as a long-term wealth-preserving investment.

Liv Ex 100 Index Level Over Time

Liv Ex 100 Index: Performance with Labeled Fibonacci Levels