We will admit it — we enjoy wine.
Though it is known as the "drink of the gods" and some bottles command insane prices, we mere mortals look for bargains like our latest fave, Plungerhead, a low-cost zin (less than $15 in most stores). Sure, we will sometimes pay the $30-plus for a 2015 Rombauer zin or a great Sequoia Grove cab, but paying $35,000 for a case of Chateau Mouton Rothschild 1945 (estimated price tag at Sotheby's upcoming Finest and Rarest Wines, Spirits & Vintage Port auction) seems, well, insane.
Or maybe not.
According to the 2018 edition of the Credit Suisse Global Investment Returns Yearbook — a must read for anyone interested in very long-term studies of asset class performance and an extension of one of our favorite books Triumph of the Optimists by the same authors — wine, as an asset class, does pretty well!
In the chart below, we show asset class real returns (adjusted for inflation) between 1900-2017 for some traditional and "non-traditional" asset classes based on the Credit Suisse's conclusions:
A few interesting observations:
1. Of course, no surprise, global equities dominate the return ranking by far.
2. It is interesting to see how well the non-traditional asset classes, better known as collectibles, perform relative to cash and U.S. Treasury bonds.
3. Gold, a perennial favorite investment for a certain type of investor, has performed horribly over this long-term period compared to simply holding cash.
We suspect adding these non-traditional asset classes to an already diversified portfolio can add value based on their "non-correlated" return streams (the price of wine or violins may zig when global equities zag). However, it is very difficult for the average investor to access these asset classes efficiently.
Who wants to create a wine ETF or mutual fund? Could be fun!