A beginner’s guide to investing
Imagine striking gold with an investment that increases in value as it matures, as most covetable investments should. It may come as a surprise that such a valuable stake is not gold or silver, but a rare liquid that can be consumed. Both wine and whiskey have made it to global research agency Knight Frank’s exclusive list of luxury investments that were forecasted to fare well during the financial crisis brought about by the COVID-19 pandemic. While it was reported to have lost a mere 3.5 percent of its momentum last year, Rare Whisky 101 director Andy Simpson notes that this minor fall was not disastrous “against many other investments.” To supplement that with evidence, a Yamazaki 55 Single Malt Whisky sold for US$800,000 at an auction in August 2020.
If you’re new to the party and want in on this liquid gold, here’s some basics you need to know about investing in whisky:
Getting a Foot Through the Door
As with any other investment, it’s crucial that beginners educate themselves and look to market trends. This means speaking to portfolio experts and setting aside a budget for your initial investment, see where whisky stands against other luxury assets, or looking into whisky funds. The SVC team helps in this aspect under sourcing, where we find authentic and limited edition bottles from verified producers, retailers, suppliers, and whisky auction houses.
Once an investor has zeroed in on the why, it’s time to focus on the how. There are various ways to get in on whisky investing, mainly if he or she will choose to purchase a bottle, cask, or whisky fund, and whether it’s through a direct supplier, producer, or an auction. Whisky can also be categorized by product, quality, and geography.
Where does one go first? Bear in mind that auctions might not be your best bet as the secondary market is quite young and bottles priced over £10,000 have multiplied 12 times since 2014. E-commerce sites are gearing up to be the next best place to source rare bottles. The only challenge there is knowing authentic from counterfeit, which have been reported to be on the rise in recent years. “The genuine ones are all the same“, says auction director of Whiskey Auction Isabel Graham-Yooll. “The forged ones are always different.”
Determining the Value of Your Investment
According to our hypothesis, less than 0.1 percent of whisky can be considered investment grade. This makes it a daunting task to sift through the millions of variations and land on just a handful to make a shortlist.
Scarcity depends on the market demand. With the figures stated above on the growing whisky investments, demand has increased over the years. “From an investment perspective, you’re looking for bottles which will experience the highest demand,” Simpson says in an interview. “Whisky investing is an economically simple market, its supply versus demand. Entry and exit is all important. Whisky can’t pay a dividend like equities and it can’t give a rental yield like property, so capital appreciation is the aim.”
On the other hand, rarity relies on the supply and how big or small batches from producers may be. Finding rare bottles can be the challenging part, as they will most likely be unavailable to just anyone, come with a hefty price tag, or sell out immediately. In one example, it’s been reported that Japanese whisky is experiencing a shortage due to Japanese producers cutting back on some of their prized tipples. This can be attributed to the fact that “distillers did not set enough [aged whiskey] aside in their aging warehouses,” says Japanese whisky expert Brian Ashcraft.
Collectability depends on the whisky variant and the number of releases in its batch. In looking at this aspect, one might be competing with those who collect whisky and drink it, rather than those looking to invest in it. Collectability may depend on the year of release or how limited bottles released may be.
Of course, your whisky investment is only as good as its age and maturation, and depends highly on whether you’ll be able to resist the temptation to drink it!