Whiskey has traditionally been viewed as a valuable collectible; however, is it feasible that this amber nectar could also be a sound investment for your retirement savings? In this article, we’ll cover the pros and drawbacks of investing in whiskey so that you can make an informed decision about whether or not to include it in your portfolio.
The Secondary Whiskey Market as It Currently Stands
The condition of the secondary market is one of the most important things to think about when considering a whiskey investment. Investors trade whiskey that has previously been released by distilleries on the secondary market. Investors in the primary market, in contrast, purchase whiskey straight from the distillery before it is offered to the general public. The secondary market for high-quality and collectible whiskies is flourishing at the moment. The growing number of whiskey collectors, the limited supply, and the worldwide acclaim that whiskey has received explain this phenomenon.
According to the Knight Frank Wealth Report, rare whiskey outperformed even vintage vehicles as an investment over a decade, with a whopping 586% gain in value. Whiskey also did better than fine art, wine, and jewelry during that time.
Whiskey has outperformed various asset groups, and it also has a low entrance hurdle. Several online brokers will arrange the acquisition and sale of whiskey casks for as little as a few thousand pounds. If you compare it to other valuables, like art or classic cars, you’ll see that this is a steal. It’s also worth mentioning that whiskey’s price has remained fairly constant over the past few years, making it a potentially smart investment for those seeking portfolio stability.
Whiskey could provide investors with a diversification benefit. The whiskey market, for instance, is less reliant on the economic realities of any one region than the art and vintage automobile markets are.
Whiskey Investment Yields Steady Profits
whiskey Investment Partners estimates that Scotch whiskey exports generate GBP4.9bn annually, or around 70% of all food and drink exports from Scotland. It goes on to say that “in recent decades,” investing in Scottish cask whiskey has yielded annual returns of between 8% and 12% on average.
Whiskey, like gold, is a physical commodity that can be used as a potential inflation hedge. Asia’s rapidly expanding middle class is responsible for the region’s emergence as whiskey’s fastest-growing market. China and Brazil, two other major rising markets, are also expanding rapidly. Rare, single-malt whiskies are highly prized by consumers in emerging markets.
After the pandemic, consumers have returned to bars and restaurants, and foreign travel and tourism have increased, both of which contribute to economic growth thanks to the United States’ suspension of tariffs. Scotch whiskey is a type of whiskey that has been aged for at least three years in oak casks in Scotland. Scotland is home to an estimated 22 million aging barrels.
Whiskey as an investment is a novel idea, but like any other asset, it should be considered alongside other options. And if the market keeps down, we might all need a drink.
The Value of Cask Whiskey and Why You Should Buy Some
Whiskey is unique among commodities in that it may be invested in at two different stages: the cask and the bottle. Bottle whiskey is whiskey that has been aged in a cask, while cask whiskey is just whiskey that has been bottled after being aged in a cask.
As an asset, cask whiskey provides numerous advantages.
No Storage Payment
First, scotch whiskey is exempt from paying for either storage or insurance as long as it is kept in an HMRC-approved warehouse.
Exempt from CGT
Second, unlike other assets, whiskey casks are exempt from CGT since they are considered a “wasting asset” by the UK’s HM Revenue and Customs.
Maturation
The value of whiskey barrels increases exponentially over time. Whiskey cask investing is one of a kind since the spirit inside the barrel keeps developing over time. Whiskey stored in a cask, in contrast to other physical assets like precious metals, property, or art, naturally improves with age. Because of this remarkable quality, whiskey’s worth increases dramatically the longer it is kept in a collection. In general, the value of a cask will approximately double every 5 years it is aged.
Recouping Initial Investment
Finally, and most crucially, investors in whiskey casks can expect to recoup their initial investment and then some when they sell their cask for more than they paid for it.
Tax-Free Capital Gains
Because evaporation is inevitable with cask whiskey, its shelf life is typically around 50 years. Casks are thus shielded from CGT in this manner. In addition, there is no IHT on whiskey casks received as presents (under trust) from an estate.
However, whiskies held on a bond are exempt from excise duty and VAT in Ireland, which applies to the wholesale sale of whiskey (up to 200 gallons). Additionally, a wholesale license is required for the sale of more than 200 gallons at a time.
Since bottled whiskey lacks these features, it is often considered a riskier investment. Buying barrels of whiskey is the ideal way to invest in the spirit because it increases in value over time, making it a good addition to a retirement savings plan.
Whiskey Casks, and How to Choose Among Them
Although there are a variety of casks that can be used, ex-bourbon casks are particularly popular in Scotland. It is said that the name “Bourbon” comes from the bourbon barrels used to age the whiskey. Whiskey aged in former bourbon barrels has a subtle vanilla sweetness.
Scotch whiskey gets its distinctive aroma by being aged in a variety of casks, not just ex-bourbon barrels. Scotch whiskey gets its distinctive character from being aged in a wide range of casks. Naturally, there are risks associated with any investment, so it’s important to get expert financial counsel before making any moves. However, whiskey could be a good alternative investment for your retirement savings.