Wine, like all art, has an intrinsic value above that it fetches at auction. Unlike most investments, when you liquidate wine, you can do it through the actual depletion of stocks, that is, you can drink it. The joy that comes from sharing a well-aged wine with friends cannot be quantified, and this is doubly true for a wine that has spent its entire life in your cellar waiting for this very moment.

Investing in alcohol can be a tricky proposition and even the financial wizards who treat Wall Street as their personal piggy bank can get their fingers burned when it comes to wine. Like all investments, you can spend your time studying historical trends, auction values, and sales data to try and get ahead of the curve, but the market is pretty capricious at the best of times. According to Rhette Gadk, Wine Director of Bounty Hunter Rare Wines, it’s atricky investment to judge in comparison with stocks or property, “There are more legalities involving the sale, resale, and transportation of alcohol than just about any other consumer industry.”

If you want to sell a stock, you sell a stock. To sell any large amount of wine, it usually involves some sort of auction service, most of whom command a premium beyond what typical investment or real estate middle men charge. It can throw off an apples-to-apples comparison pretty dramatically.

“I would say upwards of 90 percent of our clientele buy wine to drink or to put it another way, at least 90% of the wine they buy is to drink (even if they do speculate from time to time). The ability to flip certain wines off of mailing lists can be a strong allure for collectors, but we deal largely in wines whose purchaser will eventually open them his or herself.”

With countless headlines about bottles bringing record breaking prices in the auction rooms of Christies and Sotheby’s, it’s easy to forget that there’s a downside to wine investment, which can make your money disappear quicker than a Chianti down the drain.

Wines, which promise much, can fail to deliver, leaving demand low and the prices even lower, as in the case of the white Burgundies of the late 90s. Collectors and amateurs a like were stung when their wines aged prematurely and rather than keeping them in their vaults for the value to increase, they were greeted with articles advising them to drink them as soon as possible, wiping out millions of dollars in investments.

If you can’t devote the time necessary to familiarizing yourself with the intricacies of the wine market, then you can always turn to a wine investment company, in the same way the wealthy can turn to a knowledgeable broker, but as in all walks of life, promises are quickly made to relieve you of your money, but not always delivered.

We asked Rhette Gadke how to go about finding a reputable investment company. “I’d hook the pitchman up to a polygraph! Money can be made in wine investments, but it’s as risky as anything else—maybe more so given the fact that it’s a physically volatile product that by definition doesn’t allow itself to be inspected without destroying its value. Throw in no small amount of fraud, counterfeiting, and the like, and it’s caveat emptor. No doubt, there’s money to be made if you play the game right, but I wouldn’t bank the kids’ college fund on a Bordeaux futures campaign.

I would say that finding a wine merchant you trust is paramount whether your interest is personal, financial or both. There’s plenty of quicksand to be had with fly-by-nighters who have no history of honest business. It’s like anything else you’d spend money on—do your homework, ask questions, and trust your gut—not just on what you’re buying, but on who is selling it. You can figure out pretty quickly who is interested in a one-time sale as opposed to a long-term client relationship. It’s probably the single biggest decision you can make if you’re serious about wine.

Are wines with outrageous price tags worth it? There is no way to judge the answer to this. An analogy: Gadke has a client that makes over $20,000,000 a year. If this person works the usual 240 days a year, eight hours a day, his hourly rate is$10,416.67 an hour. For this person to pay for a $1000 bottle of wine, he only has to work about six minutes. If you make $20 an hour, you have to work 50hours to afford the same bottle of wine. For those in the $20 an hour range,$1000 bottle of wine is the ultimate extravagance. For those in the $10,000 an hour range, it is no more a stretch of the budget than a $2 bottle of wine. In fact, since there are so few good $2 bottles of wine, the millionaire is actually getting a bargain.

The cost of the wine may well not be an indicator of the quality of the wine. This is especially true in New World wines where the main factor in the pricing of the wine is the demand. Many wines become chic, propelled by the press who are too afraid or ill informed to speak a dissenting opinion. These wines often sport huge price tags that place them in the highest leagues of World Class wines, without the wine itself being that good. Since money is no guarantee of taste, these wines sell briskly, increasing their value out of proportion to their quality.

In fact, I would go so far as to say this is the case for the majority of New World wines that find themselves selling at the highest prices. The cost of advertising and promotion can necessitate a retail price far above a wine of similar quality with fewer overheads. Simple touches, such as gold embossed labels may add several dollars to the wine, before any wine is even added to the bottle. It requires a well-trained palate and great deal of confidence to weed out the pretenders from the truly great wines. Time often tells, and those chic and trendy wines rarely keep their value over the long haul. The bottom line is that wine as an investment is so risky as to only make it worth while for those that would be as content drinking the wine at maturity, as selling it. To make matters worse almost all localities have stringent laws relating to the commerce of alcoholic beverages that may make selling a collection all but impossible.

Want some professional opinion?
There’s a Napa-based winery called Kapcsándy that appears to have all the right pieces to be a big player. The founders are Bordeaux importers and experts with amazing standards and expectations. The industry is seeing a huge amount of overall interest in 2005 red Burgundies from both speculators and drinkers—it’s a can’t-miss vintage from a notoriously inconsistent region. The industry has also noticed a resurgence in demand for top-flight Italian wines from marquee regions like Barolo and Brunello. People are paying top dollar for the good stuff, and they should be; it’s worth it.