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A commodity decanted.

Article Excerpt
Tales of celebrated Bordeaux bought for pennies back in the 1970s going on to fetch enormous sums at auction are enough to start most of us fantasising about giving up the day job. But is wine really liquid gold or is it closer to an illiquid lottery? Well, the good news is that wine can be a sound investment both for pleasure and profit. The bad news is that you'll probably need to keep the day job.

Wine has attractive features as an asset class: both quality and rarity value increase with time, meaning that there is a natural basis for price appreciation. And the returns can be impressive: Shelly Williams of John Armit Wines points out that, for instance, a selection of 1st growth Bordeaux wines bought in 1982 for GBP2,100 is now worth more than GBP41,000. As shown in the chart, opposite, wine has beaten both the housing market and the stock market since 1982, although it is worth noting that the stock market generates additional returns through dividend payments.

On paper, these returns are appealing, but don't expect the value of your wine investment to go up in a straight line. Demand for fine wine is related to the general health of the economy and, as a result, prices can fluctuate. The last big downturn in the fine wine market was in the late 1990s, on the back of the Asian economic crisis - fine wine prices fell in 1997 and remained depressed for two years. The market then picked up again in 2000, driven by a great vintage year and millennium partying.

Right now, the weakened US dollar is dampening the current fine wine market, but this provides an opportune time to invest. And looking ahead, Ms Williams believes...