Don’t lose Money, the Warren Buffett Approach

There are many assets in the world one can invest in but it is during the bear market times that investors are more careful about their next moves.

Investing in any luxury item might look like a simple thing but there are certain rules that must be followed in order to get the most out of them. 

If there’s a world-renown investor one should be attention to that has to be Warren Buffet. His approach and golden rule to any investment is quite basic and simple: “Never lose money” and his second rule is “Refer to Golden Rule 1”.

Those rules are at most times taken as the basics of “asymmetric opportunities” when talking about investment. “Asymmetric opportunities” are those that offer the lowest downside risk coupled with the upside potential. Please remember that.

Hence, at WiV we offer fine wine in order to minimise the downside risk. You may ask but why exactly? Because fine wine is produced by a chateau, bodega, winery that has a history, a reputation, a name. Once the wine is bottled all you need to do is to be patient and wait for it to age for minimum five years from the moment you have bought it.

Yet, every winery produced a set number of bottles per year and every year yields a certain type of wine. On top of this, people who enjoyed fine wine or champagne might not be into investment but rather on drinking it straight after the wine is released to the market. Those are just some of the factors that a new investor must consider when investing in fine wine before the wine is even produced. 

However, when you compare those factors vs investing in shares the list is very simple to digest and your worries are minimal compared to management fail, damaged reputation, competition, sudden change on business model; which are some of risks you have to face when investing in S&P500 companies.

Moving on, let’s say that you’ve made the decision to invest in fine wine. Then the first thing you must do is to take the layering approach, that means:

1. Choose a region
2. Choose a wine or wines to focus
3. The more famous the chateau is, the higher the price you’ll have to pay, but it also means less probability of price swing and sentiment along the time.
4. Vintage
5. Reviews from world-known wine critics ( e.g. Robert Parker)

As must things, there are other things to consider but that’s a good five layer approach when investing in fine wine.

And don’t forget Buffett’s rule “Never lose money”.