Glossary
Wine investment
Appellation d’Origine Controlée (AOC or AC): Means “Appellation of Controlled Origin” and is the top category in the French system for ensuring quality wines. The French initiated the Appellation d’Origine Contrôlée system in 1935 as a means of safeguarding the more quality-conscious winemakers, vineyards, and areas from unethical producers who were taking advantage of the better-known names.
Auction hammer price: Some merchants and brokers will offer ‘an auction hammer price’ to vendors. This is roughly what the wine would fetch at auction.
Big Eight: An often used phrase to describe a collection of eight of Bordeaux’s highest profile producers including, Lafite, Latour, Margaux, Mouton, Haut-Brion, Cheval Blanc, Petrus and Ausone.
Bordeaux: An area of South Western France that is arguably the most important wine producing region on the investor’s horizon.
Bond, in bond: Wine held ‘offshore’ in a bonded or tax warehouse so that duty and any local taxes are not applicable.
En primeur: French term for wine which is sold as futures before it is bottled.
Fake wines, wine frauds: Counterfeit wines created with the express intention of defrauding buyers.
Fine wine: The miniscule portion of world wine production that improves with age.
First growth: Translation from the French term ‘Premier Cru’ officially designated in the Medoc classification of 1855 - including Latour, Lafite, Haut-Brion and Margaux. Mouton Rothschild was elevated to first growth status in 1973 by official decree. It also encompasses other great classified Châteaux in St Emilion and unclassified properties such as Pomerol’s Châteaux Petrus.
Garage wines: Modern micro-châteaux such as Valandraud and La Mondotte.
Improving asset: Fine wine is an asset that improves over time - until of course it becomes undrinkable and loses its value.
Investment grade wine: A true blue chip wine which is widely regarded as possessing sound investment credentials.
Liv-Ex. On-line international stock exchange for the trading of fine wines by member merchants.
Parker Jnr., Robert: Influential American wine critic who pioneered the system of scoring wines out of 100 points. He established his reputation in 1983 by rightly recommending in his newsletter The Wine Advocate that readers invest in the 1982 vintage, which has offered investors some of the best returns. Parker has provided a means of scoring wine as a commodity and these scores have become internationally recognised benchmarks. These scores have a demonstrable effect on individual wine prices, market demand and release price; some believe a wine rated above 90 cannot be bought and wine rated below 80 cannot be sold.
Provenance: Proof of authenticity and ownership history. Not to be confused with a wine’s condition.
Second growths: Translation of the French term Deuxieme Cru, officially designated in the Medoc Classification of 1855. Second growths include Leoville-Barton and Cos d’Estournel.
Small cap stocks: In wine, these are less expensive labels which can occasionally provide good returns.
Super seconds: The top performing second growths.
Trophy wines: The rarest, most expensive and bluest of blue chip wines. Usually first growths or equivalent.
Vintage wine: A wine, usually of superior quality, made from selected grapes of a certain type, region, and year, then dated and usually stored for aging.
Wasting asset: For The Revenue, wine is regarded as a wasting asset where it has a predictable life not exceeding 50 years. If so, it is generally exempt from tax.
General investment
Asset class: Different categories of investments are described as asset classes. Stock, bonds, and cash – including cash equivalents – are major asset classes. So are real estate, derivative investments, such as options and futures contracts, precious metals and fine wine. When you allocate the assets in your investment portfolio, you decide what proportion of its total value will be invested in each of the different asset classes you are including.
Capital Gains Tax: Capital Gains Tax is a tax on the profit or gain you make when you sell, give away, transfer or exchange (’dispose of’) something of value - ‘an asset’. You don’t pay Capital Gains Tax on some assets, for example personal possessions worth £6,000 or less, or in most cases, your main home. If certain criteria are met, fine wine is exempt from Capital Gains Tax.
Diversification / Diversified Portfolio: Diversification involves making investments in a wide variety of different assets in an effort to minimise risk. Because some investments rise in value while others decline, diversification can help to lower the overall level of risk for a given portfolio. Basically diversifying means “don’t put all of your eggs in one basket”.
Rate of return: The rate of return on an investment, expressed as a percentage of the total amount invested. Rate of return is usually, but not always, calculated annually. It’s sometimes just called “return”.
Supply and demand: The most basic and fundamental principals of economics in the free market. Demand refers to how much product is desired by customers. Supply is the amount of goods or services available to the market. Price is influenced by the relationship between supply and demand. For example, when either supply goes down or demand goes up, then price increases.
Tax efficient: An attempt to minimise tax liability when faced with different financial options. Examples of tax-efficient asstes include tax-free bonds, tax-free money market accounts, and stocks (shares) which are held for more than a year (thus paying long-term, and not short-term, capital gains tax). The most tax efficient assets are those that attract zero tax such as fine wine.
Veblen goods: In economics, Veblen goods are products that people actually increase their demand for when the price has increased. Examples include luxury goods such as diamonds, rare cars and Premier Cru fine wines.