The chart below shows the five-year compound average returns (CAGR) over the life of the Liv-ex Investables Index. This tracks 200 wines from 24 top Bordeaux chateaux, with data going back as far as January 1988, and mirrors the performance of a typical wine investment portfolio.
As shown in the chart, the five-year CAGR is currently under 4% – the lowest it has been since 2006 – and well below the long-term average of 14.9% (and the CAGR for the last 24 years of 12.5%). For 75% of the time, returns have averaged more than 5%, and for 60% of the time they have exceeded 10%. The CAGR has only been negative once.
The CAGR may be at its lowest in six years, but one thing is worth considering. Historically, when investing at a time when the previous five years had returned a CAGR of less than 5%, the average compound return achieved in the following five years was 17.6%: a positive number to remember as we move into the second half of the year.
