Investing in wine suggests a certain touch of class. It seems decadent to spend hundreds of pounds on a crate of plonk you don't even intend to drink.

But don't dismiss wine investment as the preserve of the well-heeled - the good news is you don't have to be rich to buy wine.

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There are two major reasons to invest in wine:

Firstly as an investment in future drinking - buying young wines at the initial release price which, when mature, would be considerably more expensive to buy.
As a strictly financial investment - buying wines with the sole intention of reselling later for a profit.

Wine can, and often has, outperformed the FTSE 100 and the Dow Jones, offering significant returns without the volatility of the stock market.

As with all commodities, the rules of wine investment are simple: `price is determined by supply and demand', and `buy cheap, and sell dear'.

As production quantities are determined by the weather, and as the producers generally seek a steady annual income, all things being equal, lower yields lead to higher prices. As a wine matures, bottles are consumed, the wine becomes rarer, and if it's desirable, its price rises further.

So much for theory, but how do you make money in practice? The classic wine investment advice is stark: Only buy the best claret from great vintages.

Store it professionally in a bonded warehouse. Professional storage reassures potential purchasers that a wine has been stored properly; in addition, wines stored under bond can be bought and sold without incurring VAT.

Wine also benefits from an exemption from Capital Gains and Income Tax.*

* please see the Wine & Tax page.