It’s hard to drum up much enthusiasm for investing these days. The housing market is in the doldrums, corporate profits continue to slump, retirement funds are losing ground and even most hedge funds are delivering, at best, meagre returns.

Experts all agree that it will become increasingly difficult to make the right decision about where to put your hard earned cash. However, for the high net worth crowd with income to spare, there are still some investments that not only hold the potential for powerful gains but can help put the fun back in your portfolio.

Classic cars, in particular, have a long and colourful history of making wise (or in some cases downright lucky) collectors a small fortune and that’s not taking into account the prestige and status they can bestow upon their fortunate owners.

Rick Carey, auctions editor for Car Collector Magazine, notes the market for collector cars has been "remarkably strong" in recent years, despite the economic slump.

"There has been only the slightest hint of softening in prices and that’s really more of a flattening out of the growth curve," he says.

Certainly these are sentiments echoed by RM Auctions, the world’s largest auction and restoration company specialising in investment quality vintage automobiles. Last autumn RM, in association with Sotheby’s, held their inaugural London sale, the largest event of its kind ever to be held in the UK. An exciting auction witnessed an incredible 85 cars going under the hammer, including a 1937 Mercedes-Benz 540K Spezial Roadster from the Bernie Ecclestone collection, which, at £3,967,000, became one of the most expensive Mercedes-Benz road-going cars ever sold at auction.

Earlier this year at RM’s sale in Maranello, Italy, a 1961 Ferrari 250GT SWB California Spyder, formerly the property of actor James Coburn, became the ‘most expensive car ever sold in auction history’ when presenter and broadcaster Chris Evans paid an impressive £6.4 million for his dream machine. It was estimated to sell for barely half that price, proving that the slowing economy has yet to affect buoyant classic Ferrari values.

RM is now looking forward to returning to Battersea Park’s Evolution centre on 29 October 2008 for its second ‘Automobiles of London’ event. Over 75 exquisite vintage automobiles are expected to roll into central London for the single day auction, including an ultra-rare, luxurious 1938 Horch 853 Special Roadster and a stunning 1938 Bugatti Type 57C Atalante.

Experts cite several reasons why the market in classic cars continues to buck the trend. There is the rising hyper-wealth in emerging economies such as Russia and India, while the softness of the US dollar compared with the euro makes cars for sale in the US look relatively cheap. Closer to home, pension simplification rules and the increased popularity of SIPPs (Self Invested Personal Pensions) means that classic cars, along with antiques and fine wines, now offer excellent tax breaks.

“Unusual assets can be an attractive addition to a well-diversified portfolio, giving an added dimension in terms of interest and the potential to generate long-term wealth appreciation”, says Rob Myers, founder and CEO of RM Auctions. “Collectability and value is driven by three factors – rarity, condition and beauty – or a combination of these. Extremely rare cars are always highly sought after collectors’ items. There are some, however, that are not good looking and accordingly fetch much less than far more common cars from the ’60s, that are beautiful. And, of course, any car in poor condition will bring much less than one in good condition.”

However, as with any financial outlay, Myers advises any would-be investor to first seek specialist advice. “Remember that the auction house knows more about the car than anyone else you can talk to so, make contact, preferably before the sale, to get a report on the car and its condition. A good house values its client relationships more than any single sale and will do its best to provide an accurate description. Ask for an opinion of the car’s value, too”.

To clear away the obstacle of definitions, cars manufactured before 1903 are called veteran cars. Those between 1903 and 1933 are known as vintage cars and those that are at least 15 years old are grouped under classic cars.

However, age alone does not determine value. The top prices are typically fetched by rare sports racing cars, such as Ferraris, Jaguars and Maseratis. Says Max Girardo, Managing Director of RM’s European Operations, “Special cars from these marques can fetch serious money and generate big returns. A Ferrari 275 bought 18 months ago for around £275,000 would today be worth £666,000, depending on its history”. The current market also indicates some of the pre-war luxury cars as being those commanding top dollar on the auction block.

Particularly desirable are cars that can boast remarkable provenance, whether it be past celebrity ownership or an impressive race history. According to Girardo, a car that boasts a famous owner in a previous lifetime can double or triple its value. “Particularly sought after are cars that represent a period in time, cars such as Mussolini’s 1938 Lancia Astura Lunga Torpedo Ministeriale, Al Capone’s 1928 Cadillac Town Sedanor or the 1965 Aston Martin DB5 that co-starred alongside Sean Connery in both ‘Goldfinger’ and ‘Thunderball’”.

However, as with any investment, there are no guarantees to be had. The classic car market has had its own version of the dotcom boom and bust and Girardo can quote many buyers who had their fingers burnt. “The Lamborghini Miura is one example of a car that was very over-valued and, when ‘70s Muscle Cars started to top a million dollars, it was only going to be a matter of time before prices came tumbling down.”

Girardo firmly believes that it is not just money that fuels the classic car market. “Certainly many classic cars are going to earn their keep. However, I would say that 99% of our collectors buy because they genuinely love their cars”.