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Investing in liquid gold
By Sam Enrico Williams 2012-04-18 10:40:19 | |
(TRAMP Magazine) - 
Andy Simpson, Founder OF Whisky Highland talks about why investing whisky is a must for this year
In collecting and investing terms, whisky is rapidly becoming the new wine, and with a little research investors in whisky can make substantial gains.
The Dalmore recently broke its own record of £120,000 for the most expensive bottle of whisky ever retailed with its 62-year old ‘Drew Sinclair’ bottle. This is one of twelve individually named bottles originally released in 2002. One of these bottles sold at auction in 2002 for £22,000 (hammer price), another bottle sold in 2005 for £32,000 (bought and drunk in a London hotel), with the most recent bottle selling for £125,000 earlier this year. That represents a 468 per cent increase on the 2002 price!
However, like any investment, to make worthwhile gains you have to understand the market inside out; get it right and the returns can be impressive. For example, if you’d bought the current best performing 250 bottles of whisky in 2008 (at auction in the UK) they would have cost £42,508. In today’s’ market they would be worth £94,884, an increase of 123.21 per cent. If you’d done the same with the top 100 bottles, the increase is 162.96 per cent and the top 10 would have gained by 297.62 per cent, according to the Whisky Highland index.
However, as with all investments, the risk of getting it wrong can be catastrophic, and whisky is no exception. The bottom 10 performing bottles of whisky represent a 73.47 per cent loss in value since 2008.
So why are prices rising at such a lively rate? The answer is that Scotch whisky has become the ultimate expression of wealth for the emerging middle classes in growing economies across the world. The demand for premium and super premium whiskies far exceeds the supply and is dragging up the price. Whisky producers have responded by launching a stream of collectable whiskies costing anything from £80 to £10,000 and collectors have in turn snapped them up.
Whisky investment has become big business, and a viable alternative to commodities such as art and wine which are already well mined. Not only is there a regular supply of collectable whisky, but relatively few have taken the whisky route and there are plenty of gems to be discovered. Some whiskies are rising in price considerably faster than most other commodities.
How do you go about investing in whisky?
The same rules of investing in the stock market broadly apply to the “Investment Grade Single Malt Scotch” market (IGSMS). The aim is to maximise capital appreciation and minimise risk. So you should consider the quality and reputation of the distillery or brand that you buy from, and the metrics of supply and demand.
1. Pick the right distillery - stick to the well known brands like The Dalmore and The Macallan which cater for collectors and investors
2. Seek out silent stills – Certain closed distilleries - known as ‘silent’ distilleries - are performing exceptionally well as an investment. Two of the most popular are Port Ellen and Brora. Both these distilleries closed in 1983 so from that date, no more whisky was produced but stocks still exist in casks
3. Go for old measures – bottles measured in fluid ounces rather than centilitres are sought after
4. Go for limited editions – the fewer the bottles the better, ideally cask strength, single cask with a vintage
5. Buy upon retail release – this is a good strategy for limited releases which can often result in good gains. You’ll need to be quick though, as some releases sell out in hours
6. Buy past releases – the best place to look is whisky retailers and auctions but you’ll often have to pay much more than the original price
In these uncertain economic times, as people seek out different investment vehicles, whisky has prospered and grown as an alternative investment. However, as with any investment there is a risk values will go down as well as up. If that’s the case with whisky, at least you’ll be able to commiserate in style!
Andy Simpson, Founder, Whisky Highland Click here to continue reading.... | |
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