Investing in Wine

The demand for rare wine is growing thanks to new wealth and palates in China and Russia. Some wine collectors say that the prices of even some second-tier wines are rising at rates that make the Dow Jones industrial average look as if it's measuring the performance of low-risk municipal bonds.

The jump in prices is causing collectors to liquidate parts of their cellars. There are wine investment funds, and there is even an electronic trading exchange in London for fine wine. It's up 39 percent this year, trailing gains in oil by only seven points.



One investor recently spotted 10 bottles of some rare Burgundy at a local wine store. He liked the price: about $3,500 for them all. The thought of drinking the wine never even crossed his mind. He said he sold them for $10,000 two weeks later. "The demand is just flat-out crazy," Bailey said.

This recent trend is a story of supply and demand. Good wine is extremely limited. Demand isn't.

Wine can now be bought and sold over the Internet, particularly at auction through well-known wine stores such as Acker Merrall & Condit in New York or through WineBid.com, one of several popular wine auction Web sites. With demand so strong, even owners of below-first-tier wines can fetch big premiums for the stuff.

Jerome Zech, chief executive of WineBid.com, remembers buying a bottle of 1990 Pichon Lalande for $29.95 in 1994. Now that wine is selling on his Web site for $140. That's a 367 percent increase in value.

"The Internet has allowed people to see pricing globally and to access wines they wouldn't have been able to. A closed, clubby environment has really opened up."

There are many risks and challenges of wine investment . Much of the value of wine is determined by the opinions of a handful of influential critics . Wine investing is not regulated. Novices can easily become victims of fraud. The start-up costs are high because of the difficulty of properly storing fine wine.

Tips for investing- Buy investment-grade wine.

Buy only wine that been rated well by recognized critics
Buy wine you'd be glad to drink just in case you have to.