On 15 December 2019, a collection of wine bottles of Australia’s iconic wine producer Penfolds sold at auction for a record price. The rare 'Penfolds Grange set', consisting of vintages since 1951, sold at auction for $372 800. This record price exceeded the previous highest price paid for a Penfolds Grange set of

$349 000 in 2018. As part of the set sold in 2019, two bottles of first-ever vintage

‘Penfolds Grange’ from 1951 achieved a hefty price of more than $81 000 per bottle. By comparison, and in 1995, a Penfolds Grange set including the first-ever 1951 vintage sold at auction for $30 000.

So was the wine set purchase in 1995 a good investment provided the 2019 auction outcome? By the Rule of 72, some experts were predicting that wine investments would double in value in 10 years; so the return predicted would be about 72/10 = 7.2 per cent per year, which is only so-so.

Similar to the Penfolds Grange set, collectables such as postage stamps, coins, art and antiques often trade at auctions. Collectables typically provide no cash flows, except when sold, and condition and buyer sentiment are the major determinants of value. The rates of return have been staggering at times, but care is needed in interpreting them. At one time at least, a rule of thumb in the rarefied world of fine art collecting was ‘your money back in five years, double your money in 10 years’. Given this, let us see how an investment stacked up. On 14 May 2019, the Claude Monet painting Meules was sold for US$110 million at auction. The last time this painting had sold at auction was 27 years earlier when it achieved a price of US$2.5 million in 1986. So was this painting a good investment?