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Fine wine is a very good investment so long as you buy the right wines from the wine vintages. Whilst only 1% of fine wine is deemed suitable for investment, due to the finite supply of the top wines combined with the high demand for these desirable goods - investors can expect around 15-20% annualised returns.
Buying wine as a future's contract (known as En Primeur) has typically produced the best returns. Last year Lafite Rothschild 2008 was released at £1,900 per case (12x75cl) and currently trades at £8,750 per case. An increase of 361%.
In general the correlation between the fine wine and financial markets is remarkably small. Whilst prices have shown some volatility over the last 25 years, in general these have been the exceptions not the rule. The market in general has been resilient when compared to the traditional investment markets. Why is this so? The reason wine is such an attractive investment is that it is a tangible asset, a highly desirable luxury product that we aspire to have. And when this asset becomes more rare and expensive, it's desirability increases - it is a Veblen good (a commodity for which people's preference for buying increases as a direct function of their price, as greater price confers greater status, instead of decreasing according to the law of demand).
Furthermore if you are based in the UK an investment in Fine Wine is free of Capital Gains Tax - because HMRC deem fine wine to be a wasting chattel.
It is important however to speak to an expert if you are thinking of investing in fine wine and there are a number of useful resources on the internet you can use.
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