A Dozen Essential Wine Terms - Part 1

Château Margaux, a First Growth from the Bordeaux region of France, is highly collectible. (Photo credit: Wikipedia)

Many of us enjoy the odd glass of wine and often have our own favourite vineyards, grape varieties and regions, however, the world of wine enthusiasts can seem a little esoteric, even daunting, dissuading us from pursuing our tastes further and exploring the myriad of wines on offer. This needn’t be the case and armed with a little knowledge, the world of wine can be a fascinating one to explore.

To help you on your way, the following provides a brief summary of half a dozen of the most common pieces of wine related jargon.

Appellation
This is a French term in origin that broadly represents the region in which a wine is produced, i.e., where a wine’s grapes were grown. It can, however, be more specific in also determining the methods used in the production of the wine or the grape varieties used, but equally can have no bearing on theses factors at all. In France the term appellation d'origine contrôlée (AOC) is used to protect the branding of certain products, including wine, so that they can only carry the appellation designation if they meet the specific criteria. Perhaps the most famous example of this is Champagne - specifically a sparkling white wine from the Champagne region of northern France.

Corked

A commonly used term to generally describe a wine that has gone off, or wines where there are small pieces of cork in the wine. The term more accurately describes wines in which a specific chemical reaction has occurred involving chlorines, which have been introduced into the wine from the cork (or during the wine making process), and which has tainted the wine. The result is that the wine tastes and smells of damp and moldy socks. Screwcaps on bottles of wine are becoming more popular because they reduce the incidences of corking which by some estimations can affect up to 7% of all wines.

Decanting

This is the process of transferring the wine from its original bottle to an alternative vessel, a decanter for example, from which the wine is then served. The process is understood to improve and release the aroma and flavours of the wine as it gives it a chance to breathe (i.e., aerate, and therefore oxidise a little). However, there is much debate as to the true benefits of the process and little empirical evidence to support any of it despite the fact that is still generally considered good practice.

Oenology/Oenophile

Oenology is simply the study of wine and all things related to wine such as the processes behind wine production (although not necessarily the cultivation of the grape which is covered by the topic known as viticulture). A person, therefore, who has an interest in wine can be labelled a oenophile, whilst an expert in these areas will be known as an oenologist.

New & Old World

These terms are used to distinguish the traditional wine producing regions, largely located around the Mediterranean in southern/central Europe and northern Africa, from the more recent territories such as Australasia, North America, South America and South Africa where wine production techniques have been exported through historical European colonisation. There are often differing characteristics between old and new world wines due to the differing climates but many of the European grape varieties and wine style/production templates used for new world wines have been taken from their old world forefathers. However, without the extensive history and perceived pedigree behind them new world vineyards are still seen to be playing catch up by some wine critics.

Vintage

The term vintage is used in a number of contexts and often slightly misleadingly. In its true sense and most accurately a vintage wine is one that has been produced using grapes from one specific year’s harvest. A wine can benefit from being a vintage if that year’s harvest produced a particularly high quality yield and as a result the term has become synonymous with better quality wine. From that inference the term has spread into common language in a corrupted form to label anything which is of a perceived quality whilst being old, but in the wine world there can still be bad vintages as well as good.

Where the wine maker is after a more consistent wine they will blend together grapes from more than one harvest to even-out the discrepancies and these wines are known as non-vintages.

© Stuart Mitchell 2012
If you want to find out more about collecting, buying and selling wine for personal or investment purposes then visit Wine Comparison.

Basic Tips for Storing Wine Successfully

This is but one of the racks of wine in the restaurant. There were three of these in the room we were in. I think they were mostly French wine. Bistro Vue 430 Little Collins St Melbourne 3000 (03) 9691 3838 (Photo credit: Wikipedia)

The world of wine and wine collecting can be perceived as an esoteric world of nuanced bouquets and rare vintages but beyond the collectors many of us regularly drink wine and often have a few bottles lying around in the home. If you have ever opened a bottle and found it to be spoilt then you may want to keep in mind a few basic, easy to remember, storage tips which all of us can benefit from whether we have are own cellar of vintages or a couple of bottles in a cupboard.

Temperature
The rule of thumb regarding temperature is to keep it cool but if you are keeping a variety of wines in one location your ideal ambient temperature will be around 12-13°C. Higher temperatures will cause the wine to age prematurely and if a wine approaches temperatures of 24°C then it will start to oxidise significantly. What’s more, high temperatures will make the wine itself expand and potentially leak through the cork.

If you are using natural conditions to regulate the ambient temperature you’ll need to be careful to avoid significant fluctuations in that temperature, even when you’re still within your minimum and maximum levels. Fluctuations cause the pressures within and without the bottle to differ and this differential causes excessive air flow through the cork which can again oxidise the wine. This is a common cause of spoiling when wine is stored in a location such as kitchen where the temperature regularly rises and falls. Ideally the extent to which temperature should be allowed to change would be 1.5°C a day or just under 3°C across a year.

Humidity
Humidity should be kept fairly high to prevent the cork from drying out. A dry cork will allow too much air into the bottle and therefore too much oxygen which reacts with the wine to oxidise and spoil it. However, it is also important not to store wine in excessively moist conditions because it may cause mold and rot and so you should aim for a humidity level at around 70%.

Light
Light, especially bright light, will affect the aging and degradation of the wine and so should be kept to a bare minimum. Red wines will tend to lighten whilst white wines darken in the presence of light and (particularly Champagnes) can be affected by what is known as lightstruck whereby the wine is spoilt by the presence of Sulphur compounds. Specifically it is the ultraviolet element of light that affects the wine so if you do need lighting it is preferable to use artificial low UV lighting if possible.

Odours
The fact that wines can breathe means that they can also absorb odours from their environment and integrate them into their flavour. You should therefore be careful to ensure that they are stored in odourless settings although if that involves ventilation you’ll need to remember the effect this may have in turn on the temperature and humidity of your environment.

Position
Wine bottles which use a cork should always be stored on their side or at a slight angle to ensure that the wine remains in contact with the cork. By doing so it prevents the cork from drying out as it would if it were stored upright. A dried out cork, as mentioned above will allow too much air to permeate the cork and therefore oxidises the wine.

For screw cap wines it can be argued that they benefit (in the absence of a porous cork) from being stored upright as this reduce the surface area of the wine that is exposed to air and may slow down the aging process.

Movement
Although there is little empirical evidence for the spoiling of wine through movement it is advised by experienced wine collectors to avoid movement and even vibrations (e.g., from heavy traffic) as much as possible as it may be a contributing factor to premature aging.

Time
It is a myth that all wines will continue to mature with time. Different wines have different optimum maturing periods and as a rule of thumb new world wines are likely to only mature and keep for 2 or 3 years, as are relatively inexpensive wines. Beyond that it will vary from one wine to the next depending on factors such as the grape variety and the chemical constituents of the wine (tannins, sugars, acids).

With these tips in mind you really can ensure you are storing wine successfully and minimising the chances of it spoiling, whether you are lucky enough to have a cellar in your house, you invest in a cooler or you simply use a cool dry cupboard under the stairs.

© Stuart Mitchell 2012

I'm a small business owner. If you are interested in finding out more about how to store wine then visit Wine Investment.

Traditional vs Alternative Investments - Part 2

The term ‘alternative investment’ can be used to apply to a broad spectrum of differing investments including more complex high risk, high return funds that invest in underlying assets such as private equity ventures and property/real estate. These tend to be the domain of professional investors or investment firms although they are available to private investors (you and me) with the help of a financial adviser. However, there are also a variety of other interesting alternative investments which may offer you the opportunity to combine hobbies and passions with the art of making money.

These investments focus on tangible items, property and chattels, which have an intrinsic value and are seen to present less risk than traditional investments - their value to some extent guarded or buffered by the presence of collectors, enthusiasts and fundamental demand in the market. However of course their value can still go up and down in accordance with supply and demand so it is worth familiarising yourself with each market before taking on the risk of large scale investments.

Property
Property had been seen as the quickest way to make a sizeable return on your investment, for a good few years, until the recent credit crunch hit. It can offer two income streams to the investor in the form of one-off sale proceeds and periodic rental income.

The sale returns on property can be high when the market is doing well, especially if you are adding value to your property through development, but recent market trends have limited returns and increased the risk, particularly as the financing of property often includes an incurred debt in the form of a mortgage. Rental income is a slightly more stable income stream because dips in the property market can push more people to rent rather than own, and therefore rental values are prone to fluctuate less (although there is still risk in finding tenants and tenants defaulting on repayments).

Wine
Having become particular popular in the seventies and eighties there is now a well developed market in trading fine and rare wines. The market is driven by both investors and collector-connoisseurs and dabbling in it certainly requires a healthy knowledge of vintages and vineyards.

The wines that will make you a return are those that are produced by a highly regarded vineyard, using good techniques to produce a wine of renowned quality that ages well. However, risk is still encountered with the fact that the investor must wait for a lengthy period for the prospect of the wine increasing in value and all the while they will need to invest in its storage whilst receiving no income on it until its final sale. In addition there is the risk that it may spoil or have been spoiled at some stage of its production.

Art - Paintings/Sculpture
The first type of invest-able chattels that would spring to mind for most people is art. We all know that a single painting or sculpture by a legendary artist can fetch well into the millions but for most budding the investors the returns can be achieved by scouting the 'next big thing'. Buying works by up and coming artists can land you a small fortune but you will have to rely on a good chunk of luck, patience and talent at spotting artistic trends.

Coins/Bank Notes
Perhaps slightly counter intuitively the value of a coin or bank note is not necessarily the same as the value that it has designated for it. If a coin o bank note is no longer legal tender, had a limited release or is made of a precious metal then the value of the coin can actually far exceed its face value. For example, a more collectible bank note such as variations of the now defunct white fiver will be worth far more than £5 and coins made from gold will be worth more than their face value as gold bullion.

Antiques & Other Collectibles
In fact, any item which has a demand can provide an astute investor with a return on their investment. Collectors and investors together drive markets in all sorts of objects from antique furniture and ceramics to memorabilia such as vinyl records and stamps. The collectibles or antiques market can be a tempting place to start dabbling with alternative investments as it can cater for any level of budget and risk starting with dalliances at flea markets and car boot sales and rising to major investments in international auction rooms. The key is building up and maintaining a detailed knowledge of the differing collectible markets and the demands for items within them.

The canny investor can ultimately invest in anything that has a value if that value can change, and the list is almost inexhaustible, from investment trusts to commodity trading to investing into the annuity market. Whatever market you are interested in it is always a good idea to seek professional financial advice and learn as much about the intricacies of the market as possible.

Traditional vs Alternative Investments - Part 1

The financial services and investments world has much been in the news over the last few years as large institutions have made controversial investment decisions, stock markets have been impacted and individuals have suffered through their private investment portfolios and pensions. There is of course still money to be made out there so it is perhaps a good time to take a look at what investment opportunities are available, both obvious and less so.

The following is a sample of traditional investment choices, but it is by no means exhaustive as even these can exist in many guises with differing levels of risk profiles:

Cash
The vast majority of us will have at some stage saved cash on deposit in a bank account and we may not think of it as an ‘investment’ as such however, by choosing a competitive interest rate cash can be a secure way to grow your money. Often the best returns will be available if you are prepared to lock up you money for the length of a fixed term. The capital you save will be protected barring the extremely rare event of your bank suffering financial collapse in which case £85,000 of it (per person per bank) is still protected by the government. The return on the investment takes the form of interest that is accrued on periodic basis.

Equities
Otherwise known as shares or stocks, equities are investments that are traditionally made in public listed companies. By buying a share you are buying a piece of that company and if the company makes a profit you will be paid a slice of that profit in the form of a dividend. The value of the shares fluctuates in line with their supply and demand which in turn is influenced by the performance of the company and the likelihood and size of dividend payments to its shareholders.

Serious investors will tend to manage diverse portfolios of shareholdings to spread the risk. If you invest only in one company and they fail or lose money then you will lose money, but by investing in a broad selection of companies, any losses in one company or across a particular sector of industry are offset by successes and gains in others. Due to the complexities of managing and analysing the companies and their risks, as well as the individual costs of making transactions, private investors often invest into funds where a fund manager in turn manages an underlying portfolio of equities.

Traditional sharedealing portfolios will usually be made up of companies which are publicly listed on a ‘recognised’ stock exchange (recognised by the HMRC in the UK) so that there is an indication as to how robustly and transparently the finances of the company are run. For those willing to take on more risk, there are also exchanges such as London’s Alternative Investment Market which lists up and coming companies where there is a potential for bigger gains, but with it a higher risk of company failures and therefore losses.

Gilts and Bonds
Bonds are in essence an investment vehicle through which you lend a company or organisation a set amount of money for an agreed length of time (term) in exchange for a pre-agreed level of interest and the return of your original money (capital) at the end. Bonds that raise money for companies are known as corporate bonds and bonds relating to governments are called gilt-edged bonds or simply gilts and are seen to have a relatively low risk of not being repaid.

Unit Trusts
A unit trust is a collective investment whereby you put your money into a ‘pot’ with that of other people to collectively invest in a portfolio of investments such as equities. In return for your money you get an allocation of units. Unit Trusts are termed open ended meaning that the size of the pot can grow - when people buy (add their money to the pot) they get a certain number of newly created units depending on how much the existing units are worth and how much they put in. As a consequence nobody needs to sell units for anyone else to buy in and therefore the value of each unit is dictated by how the money invested by the fund manager is performing rather than supply and demand of units. If the value of the investments grow the value of the fund will grow proportionately and your slice of the pie will be worth more.

A unit trust is run by one or more fund managers who will use their expertise in the markets to decide how and where the money will be invested/disinvested. However, each unit trust will have a theme depending on factors such as risk profile, ethical profile, industrial sector and the geographical location of the underlying companies which will dictate which companies the fund manager can invest in. So, if you think the car industry in Japan is set to boom, you can invest in a fund where the fund manager in turn invests in such companies.

Investment Trusts
These are another type of collective investment similar to a unit trust where money is pooled together and invested into other companies. In this case however the fund is actually a standalone company, so although it is run by a fund manager(s) it does not sit within a (financial) business which performs other functions and runs other funds. An investment trust’s sole purpose as a company is to invest into other companies as a single fund.

Investment trusts are listed on stock exchanges as distinct companies and therefore investors buy shares in that company. As with equities they are close ended so that there are only a limited number of shares available to buy. Generally someone needs to sell shares for someone else to buy them - extras share are not just created. Consequently the value of a share is determined by the demand and supply of shares in the market which in turn is driven by the success and of the trust.

OEICs
Open Ended Investment Trusts (OEICs) are a type of investment that is more similar to a unit trust in that they are open ended vehicles where the number of shares/units that make up the fund can change as and when they are sold. Again because they are open ended, the value of the shares does not change with supply and demand. Conversely however, they are also distinct companies in the same fashion as investment trusts.

Due to a number of advantages, OEICs are gradually replacing unit trusts in the UK. They are generally simpler and cheaper than unit trusts to administer and have no bid-offer spread (just a single price). Moreover, they are able to contain separate sub funds with slightly different themes that can suit different investors.

Further Investments
The world of financial investments contains many other types of opportunities not mentioned above, such as direct investments into commodities and currencies, as well as the vehicles that either invest in the above assets in turn, allow you to invest in these assets through them or base their value upon them. Examples of investment vehicles like ISAs and pensions, which offer the chance to invest in the above through them, often then offer other incentives such as access to funds and investment trusts that aren’t directly accessible to private investors, discounts on fund administration charges and tax breaks.

Having highlighted the more traditional financial investment options that exist, the second part of this article looks at other less obvious assets which can be used as investments.