Investing in whiskey has become increasingly popular in recent years. With the rising demand from China and limited supply of aged whiskey, prices have surged rapidly. Many whisky collectors are making handsome profits by investing in rare bottles. However, there are also risks like improper storage,counterfeits and market fluctuations. This article will introduce 3 main approaches to invest in whiskey and evaluate their profitability and risks, aiming to provide a useful reference for whisky investment.
Investing in rare whiskey
Buying rare and collectable whiskies that are expected to appreciate in value is perhaps the most common whiskey investment method. Limited edition bottlings, whiskies from closed distilleries,and renowned aged expressions like Macallan and Yamazaki are highly sought after. For example,a Macallan 18 Years sold for £32,500 in 2015 could fetch £46,000 a year later, a staggering 142% annual return! However, investors need to time their purchases wisely, ensure authenticity and store whiskies properly. There are risks of counterfeiting and price fluctuations.
Investing in whiskey maturation
This involves buying new-make spirit from distilleries in cask-quantities and paying to have them aged further in warehouses. The improved whiskey can then be bottled and sold for profit. According to Whisky Invest Direct,the net annual return on a 4-year cask can exceed 50% after costs. However,risks include warehouse robberies,bankruptcy of distilleries and market changes. Investors also need expertise in selecting the right casks.
Investing in whiskey companies
Rather than physical whiskey, investors can buy stocks and funds of listed whiskey firms like Diageo,Pernod Ricard and Brown-Forman. This is the easiest approach requiring least expertise. Japanese whisky fund ‘Number One Drinks’ claims an average 10% annual return. The main risk is poor performance or bankruptcy of the companies invested in.
Key factors to consider in whiskey investment
In summary, the three main approaches have respective pros and cons. Investing in rare bottles offers high potential gains but requires expertise. Maturation investment provides good returns but involves physical risks. Investing in whiskey companies is safest but offers lower returns. No matter which method, investors need to evaluate their budget, risk appetite, expertise and time horizon.
In conclusion, whiskey investment can be highly lucrative but also carries risks. Investors should carefully weigh up the different approaches based on their personal situations. Expertise, proper valuation and authentication,secure storage conditions and diversification are some key factors to consider for success.