Saved up over lockdown and not sure what to invest in? Why not invest in whisky—Nick Moyle and Rich Hood unpack how to start
While most of us buy whisky in order to savour its rich palate of flavours and aromas (not to mention the intoxicating effects of the booze) there’s an increasing number of people who are turning to the spirit as an investment. And with good reason—according to the Knight Frank Luxury Investment Index 2018, rare whisky values appreciated by a whopping 528% in the preceding ten year period.
"Rare whisky values appreciated by a whopping 528% between 2008-2018"
For those with money to gamble on a whisky investment there are broadly two routes to follow: putting your money in full casks, or seeking out individual bottles that may become collectors items in years to come.
Although it’s the high price of rare bottles that grab the headlines (a bottle of The Macallan 1926 recently sold for £1.5 million) serious investors will often choose casks as a way to earn a return on their cash. Besides taking a punt on established whisky brands, those who invest in a new distillery can see their funds help with the business’ cash flow and, hopefully, any success they achieve will earn them a financial reward in the future. But, much like investing in the stock market, even more choice can be had by investing through companies who deal specifically in the whisky market.
According to Nick Green, Managing Partner of Elite Wine & Whisky, it’s also less celebrated whiskies that are currently in demand. “We have noticed that knowledgeable investors are choosing to invest in young spirits which are aged between 3-5 years due to their accessibility and low barrier entry” he tells us. “Casks of this nature are priced between £3,000 to £6,000 and are held as long term investments in order to generate greater returns. Uniquely, these casks are not purchased from specific famous distilleries and hence are obtained at lower prices, which are due to rise year on year, with expected returns of around 8-10 per cent year on year over a 10 year period.”
"Expected returns on casks are 8-10 per cent year on year"
For anyone more interested in trying to find the next million pound bottle, or one that at least offers some degree of collectability, whisky auctions provide a great place to begin the hunt.
And, according to Isabel Graham-Yooll, auction director at Whisky.Auction, it’s not just investors who can benefit from a successful bid. “One of the biggest joys of whisky auctions is the opportunity to pick up some gems from whisky history” she explains “and there’s always a chance you’ll find them at a lower price than at the whisky retailers. By biding your time and keeping an eye on every auction, you can build up a collection that suits your tastes and preferences, without going above your budget.”
For the auction novice, Isabel has some good advice: “I believe that whisky is, first and foremost, for drinking so the liquid inside the bottle is the most important thing. New shiny limited releases in presentation boxes may look good, but will they stand the test of time? If the liquid is good, then you can safely assume there will still be demand for it in the future.”
As for any tips of what distilleries might be worth keeping an eye on, Isabel suggests bidders should “look beyond the mainstream. It can be easy to be swayed towards collecting whiskies that are fashionable now, but the best collections are carefully curated with a theme that links the bottles together. Long established distilleries like Glen Grant, Tamdhu or Glenrothes, to name just three, produce excellent whiskies and have so far evaded the carpetbaggers. With just a little research you can find superb bottles.”
"Long established distilleries like Glen Grant, Tamdhu, or Glenrothes, produce excellent whiskies"
There are undoubtedly considerable gains to be had in the whisky market, not least by offering an alternative to the volatile stock market, but as with all forms of investment, it’s not without risk. Nick Green advises any potential investor to have “a detailed understanding of the commodity and the market which you are entering into. In recent years, returns of between 12-20% were observed in the whisky industry; however there are large variations depending on the distillery, the rarity and the age of casks.”
For this reason, Green explains, diversification is key. “When investing in whisky, it is imperative that you have access to a range of distilleries which produce collectible whisky and you have an established exit plan for your investment.”
If you have sufficient funds, then owing a portfolio of whisky seems to be a route worth considering. But even whisky fans without wads of surplus cash lying around can take a punt on a favourite bottle or two as a cheap investment – and if it doesn’t work out, at least they will still have an excellent drink to enjoy.
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