Investing in... whisky!
Investing in whisky
There's basically 3 ways of investing in whisky which over the past years has become an increasingly popular investment for people looking to diversify their portfolio and hopefully profit from the booming market:
1. is quite a risky undertaking as about as many rare bottles tend to lose value as there are rare bottles that become sought after. There's plenty of websites showing the extreme possibilities but as it's hard to predict which bottles will be popular and sufficiently rare to be collectors items (with obvious candidates being also notoriously difficult to buy), it's not an evident route to go...
2. is somewhat impractical if you're not a whisky distiller or blender. There have been a few distilleries that have allowed people to buy entire barrels of whisky - sometimes under the form of a loan with a hefty promised return on investment - but the investment itself is quite high with barrels easily going for 2500 - 3000 euro per cask and that's not counting the cost of bottling and selling the whisky afterwards. Those few distilleries that I've seen borrowing investors' money to produce casks were even asking for a minimum investment of about 10000 euro which makes this too much of a gamble for a small time investor looking to spread the risk
Ergo 3. looks like an interesting concept.
Hoping for a steady increase in inherent value of the whisky "WID" is buying on behalf of the investors, there's a storage fee and trading commission to be considered. The website itself claims 11.6% annual returns over a 9 year period, although this period was not exactly randomly chosen and in other years the returns could actually have been negative.
Still I've put this third option to the test about 1.5 years ago.
Preliminary findings so far:
There's basically 3 ways of investing in whisky which over the past years has become an increasingly popular investment for people looking to diversify their portfolio and hopefully profit from the booming market:
- Buy rare bottles, hope for price increases
- Buy whisky in a barrel, let it age
- Invest in whisky in a barrel (i.e. through Whisky Invest Direct https://www.whiskyinvestdirect.com)
1. is quite a risky undertaking as about as many rare bottles tend to lose value as there are rare bottles that become sought after. There's plenty of websites showing the extreme possibilities but as it's hard to predict which bottles will be popular and sufficiently rare to be collectors items (with obvious candidates being also notoriously difficult to buy), it's not an evident route to go...
2. is somewhat impractical if you're not a whisky distiller or blender. There have been a few distilleries that have allowed people to buy entire barrels of whisky - sometimes under the form of a loan with a hefty promised return on investment - but the investment itself is quite high with barrels easily going for 2500 - 3000 euro per cask and that's not counting the cost of bottling and selling the whisky afterwards. Those few distilleries that I've seen borrowing investors' money to produce casks were even asking for a minimum investment of about 10000 euro which makes this too much of a gamble for a small time investor looking to spread the risk
Ergo 3. looks like an interesting concept.
Hoping for a steady increase in inherent value of the whisky "WID" is buying on behalf of the investors, there's a storage fee and trading commission to be considered. The website itself claims 11.6% annual returns over a 9 year period, although this period was not exactly randomly chosen and in other years the returns could actually have been negative.
Still I've put this third option to the test about 1.5 years ago.
Preliminary findings so far:
- For anyone outside of the UK, it's important to know you're investing in £ which means that
1) the bank will use a disadvantageous exchange rate (including fees) at the time of your investment which easily takes 5% from your investment
2) you're exposed to the ups and especially downs of the British pound which in this day and age of Brexit discussions means you can easily lose quite a bit on exchange rate fluctuations. So far over one year I've lost ca.13% on the pound losing ground against the euro - Deducting commissions and storage fees I've netted a 0.6% return in one year although in reality it's a 16% increase in traded value of the whisky minus 4% in fees minus exchange rate fluctuations
- To be continued... I'm hoping the pound's free fall will come to a halt (except for maybe another drop once the Brexit actually happens) and that the whisky's value will continue to increase at its current rates which only occurs if investors continue to trade on the "WID" platform.
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