The popularity of alternative investments has grown in recent years as; individuals seek to diversify their portfolios or capitalize on their expertise in a specific asset class.
According to the Knight Frank Luxury Investment Index, art has a 10 percent annual return and 146 percent per decade. Coins increase by 12 percent annually, with close to 200 percent over a decade. However, no investment is as profitable as whisky. Rare whisky may increase in value by 23 percent per year and an astounding 540 percent per decade.
But time and again, we’ve been asked “How do I invest in Rare Whisky?” Find out how to invest in rare whisky, and build your own collection for a fraction of the cost. In this definitive guide to investing in rare whisky, you’ll find out what you need to know about starting a collection. What rarities will soar in value? Which whisky is bound to the tank? How can you start investing with little money? And why should you listen to us?
Buy and Sell
There is a successful business model in and around the whisky market that may seem counterintuitive: flipping high-quality whisky bottles. Conventional wisdom suggests that we should hoard our mature whisky, pulling it out only to share with friends and family to create an air of exclusivity and indulge in a bit of tasteful gloating over its increased desirability compared to lesser expressions (why do you think cask strength releases became so popular?). However, it is by turning our hobby into a business that many enthusiasts turn their passion into profit.
The tactic of buying a product at the moment it is released and then reselling it at an inflated price has been applied to limited-edition watches and other luxury items. Now, it’s being attempted with one of the most popular beverages on the planet: whisky. The issue is determining which bottles to purchase and how to get them at the lowest feasible price. Consider that your consumers for the former will be collectors or whisky connoisseurs.
A whisky’s flavor is not necessarily a good indicator of its investment potential. The scarcity of a bottle is what makes it valuable, regardless of the distillery. Of course, there are exceptions to this rule. Three variables that will increase the value of a bottle include:
- As whisky ages, it evaporates and reduces in quantity by 2 to 5 percent each year for bottling, boosting both exclusivity and value. This process boosts the value of older whisky, which is why it is often referred to as “rare.”
- The key word here is “cask.” It refers to the vessel in which distillers age their whisky. They typically add water at the end of the aging process to lower that spirit’s proof or alcohol content. Cask Strength whisky, on the other hand, has not been diluted before bottling – meaning there is less to bottle and it, therefore, tends to be more expensive and special.
- Although you might expect it, the term “single cask” doesn’t refer to a single barrel of whisky. Instead, several hundred bottles may be filled and each one is individually numbered. That certainly increases its value.
Another good way to get deals on whisky is to maintain relationships with merchants, distributors, and wholesalers. Even if you can’t negotiate a cheaper price, you are always first in line for limited edition or exclusive releases. Additionally, the authenticity of the bottles is guaranteed.
Another option is to peruse listings on social media sites such as Facebook or Carousell. However, make sure you do your due diligence and confirm the authenticity of any bottles you find there.
Invest in Whisky Casks
You can go one step further and invest in 200- to 500-liter barrels. Whisky companies are businesses, and they sell casks to create more cash. However, this will cost you a minimum of $5,000, depending on the kind and age of the barrel you choose.
Becoming one’s own brand is a serious challenge for any investor. A person becomes his or her own brand by taking periodic samples from the cask to see whether it has aged to an ideal age. If not sold full barrel, one can always bottle it. The possible return on investment is larger, but the required work is far more.
If you are a whisky enthusiast and want to buy a single cask of whisky, they can help you select the distillery, barrel type and size, and maturation process. Remember that if you choose to bottle the whisky instead of selling the barrel, then you will be selling a single cask of whisky.
This allows you to enhance the price due to the rarity and desirability of the whisky among collectors and aficionados. In addition, if you decide to offer it at cask strength, there is another incentive to raise the price.
And if you’re well-connected with whisky fans from throughout the world, you can anticipate your bottles to sell swiftly. Otherwise, you will need to create your network and, more crucially, your reputation.
Whisky Investment Funds
Finally, there are whisky funds available that enable you to invest in the amber nectar with less experience. However, this strategy takes the greatest amount of financial commitment, particularly if the fund comprises mostly ancient, rare whiskies.
In addition, you must study since each whisky fund has a unique set of operating procedures.
Rare Finds Worldwide’s Rare Single Malts fund seeks to buy rare whisky barrels between 15 and 40 years old, as well as bottles and collections between 18 and 30 years old. Market appreciation and aging and bottling of the barrels will lead to expansion. An initial investment of at least $180,700 is needed.
The Wave Financial Wave Kentucky Whisky 2020 fund is another option. Fund managers produce an internal rate of return by purchasing and selling up to 25,000 barrels of bourbon whisky from the Wilderness Trail Distillery in Kentucky, United States. The fund has a six-year investment horizon and seeks to produce a 20% IRR during this time frame.
Lastly, The Single Malt Fund’s mechanisms are far more recognizable to investors. You may either trade the fund’s shares on Sweden’s Nordic Growth Market or buy the whiskies it purchases.
The fund is actively managed and seeks to acquire and dispose of limited edition whisky bottles on a worldwide basis. A minimum membership fee of 1,000 euros (1,600 Singapore dollars) is needed.
Final Words
Whisky is having its time in the spotlight, both as a popular bar beverage and as an investment vehicle. However, it is not immune to the hazards associated with other investments.
You continue to be susceptible to market swings and, more significantly, shifting customer tastes. The whisky business has had recessions in the past, just like any other industry.
Similar to other conventional or alternative asset classes, a degree of skill is required prior to investing. But if you’re already a whisky enthusiast, why not put your passion to work?