How to Invest in Whiskey and Other Spirits: Beginner’s Guide

Good whiskey can be expensive. This is perhaps one of the reasons why some whiskey and spirits enthusiasts turn their collections into investments. Over the past decade, interest in investing in whiskey and other spirits has surged, with some bottles fetching more than $1 million at auction.

But if you’re a whiskey fanatic, does it make financial sense to invest in your favorite Macallan bottle? Besides taste and passion, there are other factors to consider before investing in whiskey. Read on to learn more about investing in whiskey and other spirits and explore the pros and cons.

Why invest in whiskey and other spirits?

As investors seek to hedge their portfolios against the risk of inflation and market volatility, alternative assets such as whiskey have been gaining widespread attention. In fact, rare whiskey alone has seen its value increase by 586% over the past ten years, according to the Knight Frank Luxury Investment Index.

It’s also doing well on the consumer side: U.S. whiskey sales have steadily increased each year, with more than 76 million nine-liter cases sold by 2021. As investors and consumers pay more attention to the quality of high-end whiskeys, these figures could probably increase. Global Market Insights estimates that the market will reach $85 billion by 2027.

How to invest in whiskey and other spirits

Whether you already have a small collection of spirits bottles and want to expand into other high-end spirits, or you’re just curious about adding this alternative asset class to your portfolio, there are plenty of opportunities to ‘investment to investigate. However, there are four main ways to invest in whiskey and other spirits:

Invest in whiskey barrels

Buying a cask is a popular way to invest in whiskey. Whiskey often takes years to develop in its cask, and can take anywhere from five to 15 years before being bottled.

Barrel investing is often considered a more stable investment. Prices are likely to rise when the barrel is bottled, and investors could earn a return of 5% to 25%.

However, like any investment, there is some risk and profits are not guaranteed. Also, it may require a high initial cost. And there are whiskey barrel scams to watch out for. Scammers may try to sell barrels that don’t even exist, so do your research on the distiller and seller first.

Invest in whiskey bottles

Another way to invest in whiskey and other spirits is to buy a few high-end bottles and store them. For example, let’s say you want to invest in Irish whiskey. Well, you can buy bottles of younger Irish whiskey in stores, online or at auction houses, hoping that they will increase in value in 10 or 20 years.

Some whiskey aficionados look for bottles meant to be collected, not drunk. These bottles are usually at least 50 years old or older and are highly sought after. If you decide to go this route, you’ll need to research the distilleries, the type of wood used in the barrel, the batches, and the expected value of the bottles. You’ll also need to worry about proper storage and you’ll need to insure your bottles against any potential damage.

Invest in whiskey stocks and ETFs

If you don’t want to buy individual bottles and deal with storage and insurance costs, you can invest directly in distilleries and liquor companies like Boston Beer Company (SAM) and Brown Forman Corporation. This way, you can easily buy and sell stocks through your broker and track them like any other stock market investment.

There’s even an ETF that focuses exclusively on spirits companies, the Spirited Funds/ETFMG Whiskey and Spirits ETF (WSKY). The fund holds shares in companies such as Pernod Ricard (owner of Glenlivet) and Brown-Forman (owner of Jack Daniels).

Invest through a platform

One of the easiest ways to invest in whiskey is through an investment platform. These companies source and buy bottles and handle storage. Many of them also allow you to buy fractional shares and liquidate your assets if you decide that bullish investing isn’t for you.

CaskX is an investment fund specializing in whiskey casks. As mentioned above, kegs are cheaper to buy and can be more profitable than individual bottles. CaskX allows accredited investors to invest in young Scotch and Bourbon casks. The platform takes care of insurance, storage and even selling, so investors don’t need to lift a finger.

Rally Rd. is an alternative investment application that allows you to search and buy shares of high-quality commodities worldwide, including whiskey. The company securitizes the product and sells fractional shares of alternative assets. It’s a way for investors to start investing in whiskey without spending a lot of money.

Whiskey dress is a new whiskey investment platform from Vinovest, one of the leading alternative investment platforms for fine wine. Whiskyvest authenticates, stores and insures your whiskey casks, making it a completely passive investment. You have to reserve a keg now since it’s a new platform, and the entry-level American keg costs $1,200.

Things to consider when investing in whiskey

When investing in whiskey and other spirits, age and scarcity are the two biggest factors that affect a bottle’s value.

Usually, the older a bottle of whiskey is, the more it’s worth. Whiskey from closed distillers or limited-edition or single-distillery bottles can also be worth more.

There are a variety of spirits to invest in, so if you’re new to investing in liquid commodities like alcohol, stick with one, like whiskey, to start with. Some more popular high-end investment quality brands include Glenlivet, Macallan and Yamazaki. Don’t just look at Scotch and Irish whiskeys either – American and Japanese whiskeys can fetch high prices too.

Remember that investing in liquor bottles and barrels is generally a long-term, illiquid investment (meaning you can’t sell it quickly). If you’re buying bottles rather than investing in stocks or buying through a platform, you’ll also need to find suitable storage. to ensure the protection of your investment.

Insurance is another thing to consider when investing in whiskey and other spirits. You want to make sure your investment retains value. For this reason, many investors will take out insurance policies to protect their bottles against things like breakage, water damage or loss.

Historical returns on whiskey investment

If you start researching whiskey investment platforms, you may find many of them readily say that whiskey has an average annual return of 8% to 10%. That sounds great, doesn’t it?

But we have to slow down. What many of these whiskey exchanges fail to explain is that you typically need to hold your whiskey casks for a long period of time (such as 15+ years) to achieve this average rate of return. This article by Mark Littler does a great job of breaking down the math to explain why.

Now there are certainly examples of rare whiskey bottles that have doubled or more in value in just a few years. However, it is important to understand that these types of returns are outliers, not the rule.

The longer you plan to hold your whiskey investment, the more we tend to think you could expect an annual return in the 10% range. However, over shorter periods of time, your performance can vary greatly depending on the barrel company you choose.

As with any investment, it is important to do your due diligence and carefully research the historical performance of any whiskey company you are considering investing in.

Pros and cons of investing in whiskey and other spirits