It has not been a great 18 months for the reputation of wine as an investment. At the end of 2005 Gordon Brown banned the drink from self-invested personal pensions. Since then, at least three companies offering wine investment schemes to the public have gone bust.

The latest, Cellaret, went into liquidation at the end of last month, just before one of the busiest times of year for wine buyers. France's 2006 vintage is just starting to be released en primeur, in barrels for bottling later, traditionally one of the best ways to invest in wine.

But these setbacks are unlikely to cool the ardour of investors. The wine market has taken off in the past two years. The Liv-ex index, a measure of the price of 100 fine wines, has soared by about 130 per cent since the summer of 2005. By comparison, the FTSE all-share index is up only 48 per cent, including income reinvested.

With careful selection, you could have done even better. Justin Gibbs, one of the founders of Liv-ex, a market in top wines, says that Chateau Latour 1996 has risen 230 per cent to £5,350 a case in two years.

But you need to know what you are doing. Mr Gibbs points out that La Mondotte St Emilion 2000 was more expensive than the Latour in 2005 but has since slumped by 25 per cent to £2,225 a case.

One way for people with no expert knowledge to get in on the investment scene is to buy through a fund. The Wine Investment Fund (WIF) claims to have been the first to launch in 2003. Although investors can rede3em early, ideally you are meant to commit money to the fund for five years in "tranches".

The first one, which attracted only £300,000, has already doubled in value. Peter Lunzer, adviser to the fund, says that several hedge funds have invested in subsequent tranches, attracted by wine's low volatility. He says: "It is slow in getting out there, but the message is getting understood that wine is lacking in correlation to other asset classes, and that is crucial for portfolio diversification."

A properly constructed fund also offers some safety features for investors. Stock is held by a third party in a bonded warehouse and the fund must produce audited accounts. But while fund managers are often authorised by the Financial Services Authority, the fund itself is not.

There are also fees galore. WIF charges a 5 per cent subscription fee, a 4 per cent redemption charge, a 1.5 per cent annual administration fee and a 20 per cent perfomrmance fee on gains over 25 per cent.

A cheaper alternative is the Vintage Wine Fund, which, at £120 million, claims to dwarf its rivals. Charges are 2 per cent a year, pus 20 per cent of any gains after fees, but the fund is based in the Cayman Islands, a tax haven.

A more appealing alternative, perhaps, is to buy and lay down your own wine. Merchants and others will do this for you, but remember that wine investment is a magnet for rogues. Charles Metcalfe, of the Circle of Wine Writers, says to stick with the top names, whether it be wine or merchants. He adds: "Be careful where you store it. If it is in a third party's cellar, make sure it has a lapel with your name on it. I fthe receivers do come in and it doesn't have your name on it, then it will be sold as part of the merchant' sstock and you will have no specific claim to it."

Berry Brothers & Rudd, a long-established merchant, will charge £9 a year per case for storage and delivery to anywhere in mainland Britain. That looks reasonable, but you also pay a margin of between 10 per cent and 20 per cent of the purchase price to gain access to the expertise of such merchants. ANd the funds claim that they can be more selective when buying wine for investment.

Even so, many observers agree that the Wine Society, a co-operative owned by its members (including the author of this article), is a merchant with a pretty compelling proposition.

Sebastian Payne, the society's chief buyer, emphasises that it does not advise on wine as an investment but adds: "We have the advantage that we buy wines when they first come out and we store them in temperature-controlled cellars. We tend to take bank guarantees from the people we buy from and provide insurance for those who store with us. It's about as safe as you can get."

At £7.44 a case, including delivery in the UK, its cellarage charge is also pretty competitive. And the Society can offer en primeur wines to suit virtually any pocket, from £65 to £1,000 a case. In the middle, Mr Payne cites Leoville Barton, currently costing £400 en primeur, as a chateau that has seen every vintage of the past ten rise in value.

For those who want to go it alone, there is the option of storing your wine in an independent bonded warehouse approved by Revenue & Customs. Octavian, which operates from an old Bath stone mine near Chippenham, Wiltshire, will charge a minimum of about £90 for up to five cases. The price drops markedly for larger quantities.

Any investors who can resist the temptation to drink their investment can, of course, store win in their own cellars. And if you don't have one, Spiral Cellars will instal a clever circular one under your ground floor, with prices starting at £7,000. Having your investment under your feet is perhaps the ultimate comfort for the safety conscious buyer.

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