Many experts in the realm of alternative investments agree that there are really only three ways to deal with rapid price fluctuations in the fine wine market: either be dedicated to weathering the storm, start to drink from the bottles, or buy more to take advantage of the low prices. Those who have put some hard-earned money into fine wine investment may have seen bad times in the last quarter of 2008, but the prices rapidly picked up again in the first quarter of the following year.

According to experts, now is the best time for collectors to invest in fine wine, in part because it will give them a chance to fill in any expensive gaps. After the major corrections were made in 2008 and again this year, the biggest names in the wine industry were affected, particularly those that belong to the first growth Bordeaux category. Examples of such wines include Lafite, Latour, Mouton Rothschild and Chateau Margaux, among others.

To further support this stance, Charles Curtis, who is in charge of Christie’s wine department in North America, has recently said that now is a very good time to purchase fine wine. In fact, he mentioned that now is the best time in the entire last ten-years. Today, many people have become eager to take a part in fine wine as an alternative investment. The current market has brought unprecedented access to such alternative investments these days, and even ordinary people who do not have millions or billions to spend now have a chance to experience the fine wine market.

Aside from the ever-increasing prices of fine wine, another advantage for collectors who are interested in buying fine wine today comes with the ready availability of many sought-after vintages. Even if the cost of investment-grade wine still ranges in the hundreds to tens of thousands of pounds for each bottle, the exquisite flavour of the most popular vintages is virtually guaranteed to make the wine a highly prized drink, with many of the wealthiest collectors buying fine wines for consumption instead of investment purposes.

In another good example, consider Aubrey K. McClendon, Chesapeake Energy Corporation’s chief executive. A 2009 auction brought nearly $9 million dollars for his fine wine collection of more than 9,000 bottles, when he decided to sell the entire lot in response to a cash crisis. The sale was done in two parts; half in New York last March, and the other half in Hong Kong during the following month. The presale estimate was only $5 million, but McClendon actually came out well above the expected sale price for his fine wine investments.

Having a wine cellar can help a person learn to enjoy the benefits of this remarkably well-performing alternative investment. For example, only two decades ago, the cost of a first-growth Bordeaux was typically only a few hundred pounds. Today, the same bottle of wine might be worth £2,000. In addition, there are countless stories from wine merchants who have seen fine wine investments appreciate by as much as 500% in recent years.

The majority of wine merchants will tell you that fine wine investment is not generally vulnerable to the common factors that influence bonds and stock market prices. However, fine wine is comparable to many types of alternative investments, such as fine art, real estate and other collectibles. Also of note, in recent years newcomers to the fine wine investment market, such as Chinese and Russian buyers, have been identified as having a major influence on the rising prices of Bordeaux futures contracts.

In the United States there are no public investment pools or mutual funds that deal with alternative investments like fine wine, making it more difficult to make fine wine investment a part of your investment portfolio. However, US buyers can still satisfy the oenophiles in their hearts by looking into overseas ventures. In this way they may be able to find investment pools that can generate better returns. Another option is to look for fine wine investment expert who can help you decide which fine wine investment is best for your unique purposes.

Owning cases that are properly stored in cellars, or buying futures contracts for cases that are scheduled to be delivered after a year or two can be some of the best ways to invest in fine wine. For wine futures, think of them as a sort of promissory note that is only as good and reliable as the issuing merchant. Keep in mind that there is a possibility that the merchant could sell more futures than was purchased, or worse, it could be a fine wine investment scam, so be cautious whenever you are investing your hard-earned cash.

If you want to put your money in the safest alternative investment possible, it is wise to work with a well-established fine wine investment dealer, especially since we are often talking about a sizable amount of money. Just as you would with other investment platforms, always do a large amount of research prior to trusting someone with your money – or your investments.

When it comes to fine wine investment, most investors don’t actually have any intention of drinking from the collection, but instead view it as a portfolio. As a matter of fact, some buyers may not even be able to point out the distinction between a Burgundy and a Bordeaux. In addition, properly stored cases should be kept in a professional storage facility where the temperature and humidity can be carefully controlled, which is important to protect the wine’s value and keep it in condition for sale.

Alternative investments like fine wine have been generating healthy returns in recent years. For example, even throughout the recent economically bleak global forecast, there has been a steady flow of annual returns on Wine Investment Funds. A reputable fine wine investment fund will also give investors regular updates regarding the fund’s contents.

Just like every investment opportunity, fine wine investment also comes with its own potential drawback: fees. With funds this often includes 2% of management assets, with an additional 20% taken from profits. These fees are close to the charges made by hedge funds. And remember, investing in fine wine can generally bring forth greater benefits if you go for the best wines around. People who want to save and invest in lower quality wines are exposing themselves to greater risks and may do better to buy for consumption and enjoyment. In general, if you want to increase your chances of succeeding in fine wine as an alternative investment, opt for well-known producers and first-growth products.

Similarly, enlisting a professionally managed wine storage facility is of absolute importance if fine wine investment are made for business purposes. This applies to both individual collectors and wine funds. Professional storage is highly recommended by experts in order to preserve the wine’s market value and is considered imperative by most serious buyers.

The London International Vintners Exchange, popularly known as Liv-ex, is one organization that operates phone and Internet-based trading within the industry and in turn provides a wealth of information for fine wine investors around the globe. With the help of Liv-ex, fine wine investment has grown in popularity and is now considered to be one of the better performing alternative investment vehicles available. Today, there are 22 countries with 270 wholesalers located all over the world who engage in anonymous trading with Liv-ex.

Wine investors today are either those who buy into investment funds and or the tangible asset itself. In the United Kingdom alone, more than 2 billion dollars worth of fine wine is kept in bonded warehouses, all owned by either funds or private collectors. Furthermore, the market for fine wine investment has already reached 3 billion dollars annually and is continuing to grow exponentially.

Keep in mind that Bordeaux wine is almost the entire basis for the Liv-ex index, in part because those who grow Burgundies tend to have a greater influence over their wine distribution systems. Of the wines on the index, 91.33% are made up of red Bordeaux wines, 3.49% of Burgundy red, 3.32% of Champagne, 0.63% of Italian wines and 0.19% of Rhone wines. In addition, the hall of famers for this list are vintages ranging from 1986 to 2006 from Petrus, Ausone, Cos d’Estournel, Haut Brion, Cheval Blanc and Lafite Rothschild.

According to many, the market for this type of alternative investment has a strong potential for long-term growth – and demand. This demand is further augmented by increased interest from new markets in the Far East and India. With a naturally limited supply and increasing demand, the potential for fine wine investment truly goes up every time a bottle is opened.

Finally, a change in law was made that allows wines to stay untaxed for a longer period of time, compared to the previous limit, which was only two years. As a result of this change in tax law, France introduced the Bordeaux City Bond, which was presented for the first time in June 2009. To date, the only real disadvantage that has been brought about by the growing popularity of fine wine investment is that individual bottles of wine are growing more expensive by the day.

• Cork: When you purchase a bottle of wine, make sure that the cork is neither below the bottle lip nor protruding far above it. Additionally, the level of wine should be well into the neck of the bottle.  Anything below the neck of the bottle could be an indication of some kind of leakage.

• Colour: The wine colour presented in the bottle should (generally) match that of the grape from which it was made.  Wines that have a brown tint to them could be oxidized, meaning they have been exposed to too much oxygen in the air. These wines will possess both a foul smell and off taste.

• Clarity: Wine should be bright and clear. Any sign of cloudiness is a good indication that there is bacterial spoilage.

• Aroma: These smells are a good indication of potential damage to a wine:
• Sherry smell
• Vinegary smell
• Rotten eggs, garlic, onion

Mould, musty, or dampness

If your wine smells anything like one of these, then it is a safe assumption that the wine has been compromised and it should not be consumed.

• Taste: A wine that has any of the following tastes more than likely has a flaw:
• Bitter
• Sour
• Cooked caramel
• Oxidized and musty
• Sulfurous

Heavy deposits

Before purchasing any bottle of wine, take your time to check for some of the signs of trouble.  If you purchase a bottle, take it home and find a problem, don’t hesitate to take it back to the vendor where you might ask for an exchange or refund, caveat emptor notwithstanding.

It’s true, wine cellars are specially made to properly accommodate the graceful aging process that wines require, and refrigerators are not only too cold for the proper maturation of wine, but their compressor motors emanate subtle vibrations that are damaging to wines on a long-term basis.

Still, in preparation for having friends and family over to dinner, most of us will toss a bottle of white wine in the fridge ….  Many of us have no qualms about leaving that same bottle in the fridge for a few days (or even a few weeks) before we either throw it out, drink it, or take it to a friend.

So, the questions remain, “How long is too long to leave wine in the refrigerator, and just how excessively cold is the refrigerator as a storage option?” These questions float around season to season and almost always come up in midsummer, when parties and hot nights make wine a regular part of the agenda.  Since not everyone has access to a wine cellar, the refrigerator is often a tempting alternative for wine storage, making this an ongoing point of interest among collectors and wine connoisseurs.

Guidelines for ideal wine storage state that 55F (13C) is ideal. Interestingly, this temperature is what you would typically find in underground caves.  Obviously this temperature is colder than the average room temperature, yet much warmer than the average refrigerator temperature.  So what do you do?

Many experts advise that keeping a wine slightly too cold is less damaging than keeping it too hot. Bottom line -if you want your wine to be cold, or if you just want to keep it in a cold place in the summer, go ahead – it’s probably not going to cause any real damage, but when wine is of course bought as an investment, there is simply no substitute for the professional facility.

In essence, the Shanghai International Wine Exchange serves as a sophisticated internet platform whose purpose is to act as a bridge between consumers/investors and fine wine suppliers in regions like Burgundy, Bordeaux, the US, Spain and Italy.  SIWE President Li Wenfeng told Decanter.com recently that this platform was put into place because, “the government understands that many Chinese wine investors have limited knowledge of fine wine.”

The SIWE will offer information to investors about fine wine investment, advice on how to filter out counterfeit wines, “a proper channel for anyone who wants to buy or sell wine to have that wine approved and to provide a healthy wine consumption culture in China.”

China Merchants Bank is cooperating with brokers to provide packages of wines for individuals that are considered high net worth, or those with assets of around $1.5 million, says Li.  It will be a membership-based site that is open to both local and international investors.  It is expected that negociants, wine merchants and a variety of other industry insiders will join.

Li said that, “Wines sold will need to have a trace record from Chateau to negociant and to the buyer, and wines sold en primeur will only be accepted with documentation from Chateau to negociant.”  Through insurers, the government will underwrite the wines.  Meanwhile, researchers will look into the provenance of the wines, working with bonded warehouses to ensure examples of paperwork.

Organizers state that the benefit of fine wine investment as conducted through the SIWE will be that it is “an absolutely reliable, non-profit-making channel for wines.”  Li made it clear that, “Anything with high scores from Robert Parker is a potential investment wine” and thus certain to be included.

The United States never seems to take the wine industry as seriously as the UK has done.  Historically, prohibition of alcohol and multiple regulations placed on the sale of alcohol in the US have affected the number the fine wine exports finding their way across the pond.   While these historical conflicts still have a bearing on the wine industry in the US, the  rise of the internet has made it much easier for collectors to gain access to fine wines from across the globe, even from within the US.

In the past few decades, fine wine investment in Europe has blossomed further, resulting in market prices that range widely, based on diverse factors such as personal taste, overall quality and longevity offered by different wines of different vintages.  This has also meant that the cost of certain wines has increased annually, even during years when the global economy has experienced a slump.

While the sale and purchase of fine wines has historically been centered in Europe, with the United States catching on, it is perhaps the fixed supply and growing demand among Chinese and Russian markets  that will have the most marked effect on the fine wine market in the future, with the cost of the top vintages set to increase.  US investors might follow suit and learn from successful European investors who have centuries of experience behind them…

• Source of the wine: With numerous unscrupulous vendors in operation, it is crucial that a serious investor only purchase wine from a reputable organization, or indeed member of a group of companies who adopt similar “codes of practice”.  Purchasing from only such groups can allow investors to help ensure the wine purchased is authentic.

• Conditions for storage: An investor should ensure that the wine has been stored in the proper conditions, the key elements of comprise correct temperature, humidity and levels of light.  If you work with merchants regularly, they should be able to show you the history of the wine and specifically what bonded warehouse your bottle or case has been stored in.  Keep in mind that the conditions for storage are imperative to ensuring the quality of any fine wine.

• Distance from origin: The shorter the distance between the seller and the buyer the better. Shorter distances can help investors ensure the quality of their wine, while greater distances can leave your wine susceptible to damage from travel and improper storage conditions.  One of the best suggestions for storing fine wine is to keep it in a specialized warehouse in France or the UK, where it can be relatively close to the producer and will easily satisfy the next person who purchases it from you.

The best of the best can be determined by looking at a wine’s provenance.  It will likely make the difference between finding a great investment, or merely one that is average.  The difference can ultimately mean hundreds or even thousands of pounds.

You might be asking yourself what attracts so many savvy investors to fine wine as an alternative investment?  Past years have shown that first-growths have been known to appreciate by as much as 15% annually. This is sometimes enough to convince people that fine wine is a tangible, viable alternative investment.  And we mustn’t forget that with the recent surge in Chinese interest in the fine wine market there is added potential (global economic conditions notwithstanding) for many more years of strong appreciation rates.

However, for those who are new to the world of fine wine investment, there is no greater disappointment than to learn that you have invested in a clever wine scam.  To begin with, apparently nearly 5 percent of the world’s wine is counterfeit and is simply new wine in an old bottle. Perhaps more of a serious problem is the prevalence of purported “investment” companies who purchase no wine for their clients and then disappear, never to be seen again – or even worse still, similar companies who claim to look after “investment” clients’ best interests, yet overcharge massively – such a prima facie failing is unfortunately all too apparent in the UK.

If you are considering an investment in fine wine, key factors to consider (amongst many others) are that you purchase only the very best examples of investment-calibre wines, at fair prices, through a reputable organization – if it feels “wrong” somehow, it probably is; and in doing so ensuring the provenance of the wines. Once bought, storage should be done only in a professionally managed facility, ensuring the stability of the product (it requires the proper temperature in a humidity controlled environment to be maintained. Such protections are the only ways to ensure that you maintain the potential for return when you decide to sell.