In October last year, a bottle of a 60-year old Macallan whiskey was sold for more than $1.1 million. 24 hours later, Christies sold another bottle for more than $1.2 million. Earlier in the year, a bottle from the same distillery sold for more than $1.1 million in Hong Kong.
These trends in the premium whiskey market has seen prices soar. This has been caused by increasing demand by the traditional westerners and wealthy Asians, who are attracted by whiskey from places like Scotland and Japan. Indeed, rare and premium whiskey has appreciated by more than 140% in the past five years according to the Vintage 50 index compiled by Rare Whiskey 101. So, how should you invest in whiskey?
Why Invest in Whiskey?
To be clear. Whiskey is a complex investment asset. It is particularly complex because of the vast variety of the product that is available in the market. Today, you can get a bottle of whiskey for less than $5 in most places around the world. Therefore, it takes a long path to understand the best way of investing in whiskey.
There are two primary reasons why you should invest in whiskey. First, if you have taken the long path of learning more about whiskey, it is relatively easy for you to invest in it. Like in stocks, all you have to do is to research and find the best type of whiskey to invest in. Second, after you have invested in whiskey, you don’t need to do anything. All you have to do is wait for the price to appreciate.
However, there are also a number of risks for investing in whiskey. These are:
- Whiskey is a highly delicate asset, which means that you must handle it with care. If you break or accidently open the bottle, you lose your investment.
- Whiskey is an illiquid asset, which means that it is difficult for you to exit the investment. This is unlike stocks, which you can exit at any day or time.
- Whiskey is a long-term investment. It takes decades for investors to realize their investment.
Understand Whiskey Lingo
Each investment asset class has its own lingo. This is true for commodities like crude oil, currencies like the dollar, and stocks like Apple and Google. This is also true for whiskey. Some of the terms you need to understand are:
- Malt whiskey: This is whiskey that is produced using malted barley, yeast, and water.
- Single malt: This is whiskey that comes from a single distillery.
- Single cask malts: This is whiskey that comes from just one cask.
- Blended malt: This is whiskey that comes from more than one distillery.
- Blended scotch whiskey: This is whiskey that mixes malt whiskies and those made from whole grains other than barley.
- Angles share: This is the alcohol that evaporates while the whiskey is maturing. If the alcohol by volume drops below 40%, it cannot be sold as whiskey.
How to Invest in Whiskey
Thee are four primary steps you need to follow when you want to invest in whiskey.
Practice is the best way for you to succeed if you want to invest in whiskey. Therefore, go to different bars and taste as much whiskey as possible. It is recommended that you go to bars that have a good collection.
Do your homework
In this stage, read as much as possible about whiskey. Fortunately, you can buy many whiskey-related books on Amazon. Focus on historical books on whiskey from Scotland, United States, Japan, and Ireland. Go Shopping
Now that you have some ideas about whiskey, go shopping and buy a number of limited editions. As you do this, avoid getting burned. A good way to avoid being burned is by using a trusted whiskey expert to guide you. You should also attend some of the popular whiskey-related events and touring popular distilleries. Insure Your whiskey
As mentioned above, whiskey is a high-risk investment because your bottle can break any time. Buglers can also steal your collection. To stay on the safe side, it is recommended that you insure the whiskey. Today, many companies like AIG are insuring exotic investments like whiskey, watches, and cars. While buying a policy might seem as an expensive bet, it is worth it in the long run. The rule of the thumb is to check or revalue your collection of whiskey every three to five years. According to Ron Fiama of AIG:
While obviously everything we insure is important to our clients—homes, cars—it’s the collections that they are overwhelmingly passionate about. These are often things that they spend their lives accumulating, curating, and selecting. There’s a tremendous amount of emotional attachment to them.
If you are into exotic investing, whiskey makes a good investment choice. In fact, the value of premium whiskey has been on an upward trend. You can also use a number of online platforms to invest in whiskey. However, we recommend that you first invest in highly liquid assets like stocks, bonds, indices, and ETFs before you start investing in whiskey and other luxury products. We also recommend that you take a considerable amount of time learning more about whiskey.
Crispus is a finance professional with more than a decade experience in the industry. Over the years, Crispus has written in-depth articles on leading platforms like CCN, Marketwatch, and Seeking Alpha. He also runs a Forex education and managed account company called WestEndFx.