KEY POINTS:
Being able to enjoy the finer things in life is what many people strive towards, but what about making money from them?
Could that dusty bottle of Bordeaux stashed under the stairs or the original artwork bequeathed to you by a favourite aunt be your ticket to wealth?
Dealers and auctioneers suggest it could be a possibility.
WINE
Luke Batchelar, managing director of Batchelar Fine and Rare Wine - a wine sourcing and cellaring consultancy firm, says fine wine has seen a stellar run over the past few years.
"Between November 2004 and November 2008 the Bordeaux index [the index which tracks the sale of wines from the Bordeaux region in France] went from 100 to 260 - a 260 per cent increase."
But, he also admits, in the 2008 calendar year the index was down 11 per cent due to large numbers of investors selling up and racing into cash as the world's economic markets hit turbulence.
"There has been a slowing in the market, a slight sell-off, but not to the same extent as the stockmarkets."
During the same period the FTSE 100 fell by more than 30 per cent and the S&P500 dropped 40 per cent.
He suggests a conservative return on a fine wine investment would be 10 to 12 per cent per year but says there are a lot of other factors that make it very different from more traditional investments.
"Investors have to think about the liquidity of their investment. Like a Picasso, you can't sell it in 30 seconds. It might take months to find the right buyer."
More than 90 per cent of tradeable fine wine comes from Bordeaux which has a long-established history.
But Batchelar says only about 10 wines rank in the top level and to get a shot at buying those you have to know the right people and get it on allocation.
"When that gets on to the secondary market there is usually a mad scramble to buy it up."
After Bordeaux there is a little bit of Burgundy traded and then there is the vintage Champagne - the 1970 Dom Perignon.
Vintage port is also traded as are cult wines from the new world which include a sprinkling of Californian, Australian and New Zealand wines. From Australia that would include Penfolds Grange and in New Zealand Felton Road or Dry River.
"It's not the sort of stuff you are going to pop into Liquorland to pick up."
Batchelar says a lot of people buy wines with a dual purpose.
"They buy two cases - one to drink and one to sell in the hope that selling the second will pay for the cost of drinking the first."
Similar to a share investment some will never even physically see their wine, storing it in cellars on the other side of the world to sell in a few years.
But unlike shares, wine has a finite lifetime.
"Rare wine gets rarer and rarer as people drink it and there is less left over, at the same time it has a finite lifetime - 20 to 25 years is the real peak flurry of activity. At 10 years it is becoming good to drink."
Batchelar estimates there are several hundred wine investors in New Zealand, many of whom are either expats or New Zealanders who have lived on the other side of the world.
But buying a case of fine wine does not come cheap.
Batchelar says a case of Bordeaux of a recent vintage can set you back between 3000 ($7543) and 5000 ($12,570). A case of Australia's Penfolds Grange can go for $6000.
"If you are going to put in a couple of hundred dollars it's probably not going to work for you."
Wine investing is not a one or two-year thing and, like other investments, the value can go down.
But Batchelar believes the long-term value of fine wine will be driven by the emerging middle classes in developing economies like China and India who suddenly find themselves with a greater disposable income.
ART
While the wine market has gone down this year, New Zealand's art auction market has had its second-best year in the past five.
According to the Australian Art Sales Digest, $18.66 million of art was sold at auction in New Zealand during 2008, not far short of the record-breaking year in 2003 when $19.35 million was sold.
Digest author John Furphy reckons the figure was driven up by the high prices attained by a number of Charles Goldie paintings.
Of the top 10 sales during the year, eight were Goldies, one was a Bill Hammond acrylic and the only other artist to make it into the top 10 was Charles Blomfield with a painting.
The highest-priced Goldie oil painting, entitled Hori Pokai - Sleep 'tis a gentle thing, went under the hammer at Auckland's International Art Centre in March for $448,000.
Hamish Coney, managing director of auction house Art + Object, which recently held four art auctions, says that after a dire financial year he had expected the auction market to be hit hard.
"We were bracing ourselves for a poor performance but were highly pleasantly surprised by the results."
Coney says good-quality rare works are still attracting buyers and reckons the decline in shares and property has been a boon for the art market.
"I suspect it is because there is no confidence in those marketplaces."
So how do you know if an artwork is going to give you a good investment return?
"I don't think people look at it quite as clinically as that. Investors need to think like collectors and do their homework - it's not like buying gold or shares."
But he says investors should look for work that is held in major collections, artists who have won prizes recently and work that has been curated.
"A good artist usually has a significant amount of achievement behind them."
A love of art can also be a help.
"I've never had a conversation saying 'I don't know anything about art - show me three things I can make money on'."
While Coney says you can't go wrong with a Goldie, not everyone can afford the $100,000-plus price tag.
His says there are different categories of artist - senior, mid-career and emerging - and good buys can be found in all.
But you won't find anyone in the art market who is willing to give an average return on investment.
Coney says there are no hard and fast rules on how long one should hold on to a piece of art to make a profit on it.
COLLECTIBLES
Dunbar Sloane snr, of auctioneers Dunbar Sloane, says that at 65 he has never seen anything like the current economic crisis.
"They are just printing money and throwing it at us to get people to start spending again."
But he believes there are still some avenues where people can buy with confidence.
"Collectibles seem to be holding up quite well. People have to wait a long time to find something good in that area. Maori artefacts, for example, are selling strongly still. They have hardly dropped at all. New Zealand historical items and colonial furniture is getting a little bit less than this time last year but is still selling. Jewellery is also popular - especially silver jewellery from the 1880s."
Sloane reckons the key to a good investment is to buy quality and to buy rare.
That means an investor should do the homework first by reading the catalogues put out by auction houses and getting advice.
"Provenance is so important - you've got to be careful someone isn't trying to sell you a rip-off."
One example was a greenstone tiki that was made recently and had been created to look older than it was.
"You are better to pay $50,000 for a great tiki than $8000 for a mediocre one."
Sloane believes those in the collectible business for investment purposes should re-sell items fairly quickly because things can go in and out of fashion. "If you don't want to keep it forever, then sell it faster. If you are a collector - never borrow to buy the stuff."
INVESTMENT ADVICE
But those used to dishing out financial advice are much more cautious about alternative investments.
Acumen financial planner Lisa Dudson says the biggest risk with investing in luxury items such as wine, art and collectibles is lack of knowledge.
"It's very speculative - it's hard to know what is going to happen to the value of a piece of art. The public just don't know." Dudson recommends only 10 per cent of your portfolio be invested in these alternative assets, although she says that can depend on the age of the investors and how conservative they are.
"When I look at people that do invest in art and wine they have usually got a passion for it - it's part of who they are. How much they invest depends on their age, income and general risk profile. If they are very conservative, 10 per cent might be on the high side."
Dudson says it is difficult to know what kind of return can be attained as there are not a lot of data around on the likelihood of reselling an item or how much an investor would get for it. "I know the odd person who has done exceptionally well but they have been doing it for years."
She says those who are keen to give it a try should be realistic about the investment returns because it is very speculative.
"They need to think through how it fits with the rest of their investments. Whether they are doing it from an investment point of view or for a hobby. It's not for the average Joe Punter."
Lyn McMorran, president of the Institute of Financial Advisers, says those who get involved in investing in luxury items tend to have quite a lot of money and know a lot about the area themselves.
"I don't know anyone who provides specialist investment advice on it," she says.
McMorran, who runs part of the private client division for Westpac Bank, says there isn't a right or wrong amount people can invest. "It depends on how much they have got and how much they are prepared to lose. It's a little bit like gambling."
