Develop a nose for some vintage investments
But prices can be volatile, and returning from Calais with a car full of bottles won't turn you into a millionaire. James Moore offers some advice to prevent any vintage portfolio going sour.
Serious wine drinkers have been crying into their glasses and looking mournfully at their wallets. Because, like it or not, their favourite tipple has become one of the hottest investment commodities around.
Some of the gains in price of the top Bordeaux Chateaux make even the FTSE 100's brightest stars look dim by comparison.
If you had bought a 12 bottle case of Chateau Latour 1990 from wine brokers Farr Vintners in August 1991, for example, you would have paid pounds 376. The same case in August 1997 would have cost pounds 2,000 from the same merchant, an increase of 432 per cent.
Gains of 300 and 400 per cent over the same period are common for the top 10 investment wines from Bordeaux, such as Chateaux Latour, Lafite, Margaux, Mouton-Rothschild and Petrus from top-rated vintages. Returns at auctions have been even more spectacular.
In recent years the price of fine red Bordeaux, where the majority of "investment" wines are made, has shot up. Other investment wines, such as vintage Port, fine red and white Burgundies, Sauternes and one or two top names from the New World, have also seen impressive price rises following their release on to the market.
Aside from the potential returns, one of the advantages of investing in wine is that it can be bought and sold in bond to avoid payment of excise duty and, because it is seen as a commodity and buying is a commercial transaction, any appreciation in price avoids liability to capital gains tax.
This has not gone unnoticed by the professional money men and some have gone so far as to set up firms with the accent on selling wines on the back of their investment potential as much as their drinking quality.
Gary Boom, a former currency broker, is now chairman of wine broker Bordeaux Index. He says: "Taking the compounded returns each year since 1978, the Dow Jones Index would give you 14 per cent, the FTSE 100, 12 per cent but the Decanter magazine index of auction prices of the top 59 Bordeaux wines would give you around 17 per cent."
He thinks prices will continue to rise and the opening up of new markets for the best wines will add fuel to the fire.
"I'm very bullish about prospects. I still believe that fine wine is underpriced. Say wine catches on in China, the top producers can't increase production and every time a bottle is drunk that is one less on the market. It also has an archaic system of pricing and distribution - when that gets sorted out prices will rise."
The independent financial advisers, Quest Bureaux Financial Planning, set up a sister company, Quest Fine Wine Investments, to cater for investors willing to sink serious money into a bit of what they fancy.
Marjorie Henry, the company's marketing director, says: "Our interest in fine wines came from experience of clients with portfolios of fine wine.
"The people who are approaching us are looking to have wine as part of a portfolio. It is a good long-term investment." This led to the launch of the new company in 1995, followed by the launch of an internet service at the end of last year.
She says the company is run on the principles of best advice like Quest Bureaux Financial Planning, though the wine broker is not regulated by the Personal Investment Authority because the sale of wine is a commercial transaction and outside the scope of the Financial Services Act, which covers most investment products.
But there are pitfalls. As with any investment, the price of wine can fall as well as rise, and there can be considerable volatility in price.
Buyers should also take care to get a certificate of ownership and to ensure that each individual case bought is marked with their name and details.
If this is not done, in the event that the company from which the wine was purchased collapses, it can be difficult to establish ownership. Thousands of pounds could be lost.
It also pays to ensure the wine is stored correctly, in a dark cellar at a constant cool temperature, and to take advice.
Gaylene Thompson, a wine trader at Farr Vintners, says: "When you look at the numbers it is hard to argue but I would advise caution.
"You have to realise that the price of wine can go down as well as up. You have to stick to the blue chip wines from good vintages and know what you are doing - after all, I certainly wouldn't start investing in shares without any knowledge."
Simon Woods, editor of Which? Wine Guide, says the really spectacular gains have come to an end for the present.
"The rushes of blood are now finished and things have got more sensible, prices have stabilised," Mr Woods says. "The gains are likely to be more long term now."
The boom has been fuelled by increasing interest in fine wines from the newly enriched in the "tiger economies" of south-east Asia, where recent events will have priced buyers out of the market for a while.
But there are still good reasons why prices will rise rather than fall. There was a run of poor vintages in the early 1990s in Bordeaux. Stocks of the great vintages from the 1980s, such as 1982, 1985, 1986, 1988, 1989 and 1990, are now thin on the ground and new vintages such as 1995 and 1996 have been released at ever higher prices.
The wine producers are also waking up to the money being made from their products and have increased prices at release accordingly.
Mr Boom says in the long run he is optimistic that the prices of top wines will continue to surge forward in price.
He adds: "If you get a portfolio of the top wines you will do very well. Even if the price does go down you can always drink it. You couldn't do that with a share."
As for wine drinkers, some of them have been catching on. Ms Henry says: "A lot of people are looking to build up their cellars; their interest is in wine for drinking." These people buy more than they need and sell the excess to fund their purchases. "This means it is possible to get their wines for drinking for free so they can drink the very best."
23 January 2015 08:00 PM
I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.
23 January 2015 08:00 PM
23 January 2015 08:00 PM
While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market
21 January 2015 12:32 PM
A new free app is aimed at the three-fifths of Brits who have never switched supplier
20 January 2015 09:34 AM
Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate
17 January 2015 12:00 AM
Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt
17 January 2015 12:00 AM
In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.
17 January 2015 12:00 AM
In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.
15 January 2015 12:23 PM
The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000
14 January 2015 08:55 AM
A shock report reveals that fuel poverty is affecting desperate families – and their children
14 January 2015 08:59 AM
Most people are too confused to know how to use their pensions for a secure income
10 January 2015 12:00 AM
Simon Read: Inflation is riding the slow train. So why have we been given a one-way ticket to travel on the fares express?
10 January 2015 12:00 AM
I struck a chord with many of you when I wrote a piece earlier this week about rising train fares. It seems there is an army of travellers who feel they've been ripped off by increased transport costs.
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Bargain Hunter: From The Outsider to 1984, catch a cut-price classic, read it in the rye
Pension firms must ask consumers more questions, says City Watchdog
Money Insider: Smart alternatives to the pensioner bond
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
30,000 reasons why the rhetoric on immigrants claiming benefits can stop now
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village