(FORTUNE Small Business) – You're way past cheap Australian reds and bargain-basement Chileans. Plunking down 30 bucks for a California chardonnay is no big deal, and you're familiar with even the most obscure Oregon pinot noir. It's time to take your knowledge to the next level and taste the wines that get rapturous reviews, those life-changing wines with hyphenated, unpronounceable names. Unless you're well connected in Napa Valley or don't mind paying 200% restaurant markups, an auction is your best chance to get hold of these highly touted bottles that fly off retailers' shelves--or never even get there in the first place.

Fortunately it's a great time to bid on wine. In the mid- to late 1990s quick dot-com wealth, the legalization of wine auctions in New York State, and the popularity of online auctions energized the market. From 1993 to 1999 the value of wine sold at auction in the U.S. leapt from $14 million to almost $100 million, according to Wine Spectator. While fine Bordeaux and high-end California cabernet sauvignon are still shockingly expensive, the reversal of Internet fortunes has caused most other prices to soften somewhat and prompted stock option paupers to trade in their precious liquid for liquidity. Savvy bidders can walk away with excellent values.

Live auctions in the U.S. happen predominantly in the biggest cities, specifically New York, Los Angeles, San Francisco, and Chicago. Major houses such as Christie's and Sotheby's hold several dozen auctions per year in these cities (see page 108) and let people who live elsewhere place bids over the phone. High-end wine stores also conduct auctions, although less frequently. Responding to the success of Internet auctions, some established houses hold online sales as well, and sites like winebid.com have sprung up specifically to facilitate e-auctions.

Before you go in, realize that there is no better way for a fool to part with his money than at an auction. "The overriding consideration is caveat emptor," says William Edgerton, editor of the Wine Price File ($45, Wine Technologies, 617-323-8745), a book that catalogs prices paid at major auctions. Wine is especially risky, for a couple of reasons. An auction house can weigh the carats in an antique diamond ring or authenticate a Chippendale dresser, but no one can guarantee that a rare bottle of 1945 Chateau Mouton Rothschild will still taste sublime. (One would hope so, given that Christie's auctioned off a case back in 1995 for a staggering $112,000.)

Even in great vintages, some bottles turn out better than others, and this variation is a particular problem with older wines. Prolonged exposure to light, vibration, and extreme temperatures will ruin wine, and while respectable houses deal only with bottles that have been properly cellared and inspect them for any damage, it can often be difficult to track a wine's complete history. Auction catalogs should describe the storage conditions for each lot. (The catalogs are available about a month before each event; Sotheby's charges $60 for a bound version and Christie's charges $25, but both post catalogs online free at sothebys.com and christies.com, respectively.) You want to see phrases like "temperature controlled" and "professional storage." More reassuring are the magic numbers 55 degrees and 70% humidity, which represent the ideal storage conditions for wine.

Once you have the catalog and know what's going to be for sale, familiarize yourself with recent prices paid for that wine by looking in Edgerton's book and the auction index in Wine Spectator. Attending several live auctions before bidding will also give you an idea of the going rates. Plus they can be a lot of fun. Christie's and Sotheby's--along with many wine shops--will hold pre-auction tastings for the public and let you sit in on the action for free, even if you're not bidding. If you do want to participate, contact the auction house before the sale to register, as your banking and credit history will have to be confirmed. And don't worry--unless you've registered and have a paddle in hand, the auctioneer will ignore you. "People don't need to be concerned that by scratching their ear they've just spend tens of thousands of dollars," says Anthony Hanson, senior director of Christie's international wine department.

The procedure itself is straightforward. Bidding starts below the estimate listed in the catalog--the exact amount is at the auctioneer's discretion--and goes up from there. Realize that final bid prices don't include the "buyer's premium," meaning the auction house's cut, typically another 15% or so. Because many buyers fax or call in bids, don't expect a lot of face-to-face standoffs. Still, the auctioneer's rapid patter and the astounding dollar values thrown around can be exhilarating, particularly for classic Bordeaux and California "cult" bottlings, small-production wines that fetch huge sums. Three bottles of Screaming Eagle, a Napa Valley cabernet sauvignon, sold for a cool $11,500 last year.

"Those are the fields in which the big boys play," warns Edgerton, who advises seeking out less hyped wines from the Loire valley, Alsace, or Germany. Mixed lots, a selection of bottles from several different producers, can also be a good value. And it helps to be unconcerned with aesthetics. Serious investors pay a premium for bottles in their original wooden case and with pristine labels; the same bottles in slightly scruffier condition will auction for less. And if you must try your hand at Bordeaux, start out with good, if less glamorous, chateaux and underrated vintages, such as 1988. At a recent Butterfields auction, a case of Cos d'Estournel from that year sold for $747, compared with $1,035 for the more celebrated 1986 vintage.

People with more modest budgets can try Internet auctions, which offer smaller lots and cheaper wines. They're also riskier than regular auctions, so look for established sites, like winebid.com, that inspect the wine before putting it up for auction. Prices on winebid.com start as low as $15 dollars a bottle, and the selection rivals that of many established brick-and-mortar auction houses. (Before starting, do your legal research--some states prohibit shipping wine through the mail, and the laws can get complicated.)

As someone who can't spend four figures on a bottle of wine, I decided to try my hand at online bidding. I searched for an unusual bottle from a recent vintage, figuring the older the wine, the greater the potential for problems. Ultimately I settled on a 1998 Cote Rotie made by Tardieu-Laurent. These hearty reds from southern France are among my favorites, and at their best can smell like chocolate, pepper, violets, and bacon. They're also relatively rare--Tardieu-Laurent produced just 500 cases that year.

I put in my bid for $75--almost ten bucks more than retail, according to the distributor, but worth it considering I couldn't find the bottle in stores--and asked to be e-mailed if someone outbid me. The auction was open for 11 days (winebid.com holds auctions starting every two weeks, with a few days off in between). No one did, and the bottle was all mine for $85, buyer's premium and shipping included. Not bad, but not a bargain either. At Christie's a case of the same wine had been sold several weeks earlier for $748, or $62 per bottle. Much cheaper, but also much more impractical, given the impossibility of storing wine in my tiny, hot apartment. As it is, I'm very happy with my little splurge. Until I can scrounge up enough cash for a case of '45 Mouton, it'll have to do.