‘Fine wine or Scotch whisky’ which gets the better return?
Investors who have been burned by a volatile stock market are looking for alternative investments. Some turn to gold, while others look at more liquid investments – fine wines and whisky. Some labels have skyrocketed in value during recent years, and increasing demand in Asia has the potential to raise prices higher still. For investors who want to diversify, this is an approach to consider.
Risks and rewards
There are plenty of stories of wine investors who have made enormous profits, by investing in top quality French wines. One investor, Kenneth Waltzer, had a case of 1986 Bordeaux which he paid $700 for, and sold for $4,500 ten years later. With returns like this, wine seems like an attractive investment, indeed. Whisky investments have also produced some stellar returns, and this niche is growing, though it is still far smaller than fine wines.
Experts warn that there are risks to consider, however, which don’t exist in the world of stocks and bonds. Your wine could prove to be counterfeit and worthless, or it could turn to vinegar if not stored and handled properly. There is also the chance that one of the top wine experts could give your wine a poor rating, causing its value to plummet.
It is also not as easy to get expert advice as it is in other sectors of the financial markets. Normal financial advisors do not have the expertise, though they could offer you advice on how much of your portfolio to allocate to this new segment.
How to get started
Most people who begin investing in either wine or whisky do so because it is something that they already enjoy. You’ll need to do a lot of research to learn about the field, and this will be easier and more fun if you already have an appreciation for the products you’ll be buying. Plan to start small. Read books on wine or whisky, and take some courses if you can. Learn as much as you possibly can, and start by buying small amounts. Move slowly on this, rather than diving in head first with large investments.
Investing in wine vs. whisky
For wine, most investors focus on the investment grade wines – the classic wines from the top chateaux in Bordeaux. These are expensive to purchase, but are deemed “blue chip” due to their ability to appreciate in value. There are many other wines which can be profitable investments, but as you move away from the blue chip wines, your risk increases. Red wines are generally the best for investing, since they tend to get better with age.
Whisky does not have as much variability as wine does. Currently, the world record for a bottle of whisky at an auction is $94,000. Between 2008 and 2012, the best 250 investment grade whiskey bottles grew in value by roughly 183%. This can only mean than whiskey have great potential for offering high returns. This 2014, a new world record was set: a barrel of Macallan whiskey was sold for $206,500 in Hong Kong.
While the grapes for a wine vintage can be greatly impacted by the weather one year, the grains that go into whisky are quite stable, and whisky from one year is much like the next. Also, whereas wine continues to mature and improve while it is in the bottle, whisky is aged in the cask, and is stable in the bottle. This makes it more difficult to buy whisky for a low price and sell it for a profit.
Investing in liquid assets, such as wine and whiskey, always comes with a risk. Fine wine as an investment can bring significant returns, but you can also end up with plonk if you’re not careful. Whether you’re just starting in this business, or you have years of experience, it’s really important to make sensible decisions. Never buy wine or whiskey from anonymous sources because you can’t know if their product in genuine or not. There have many scams in the wine investment business over the years, and many have fallen into the trap. While we can agree that liquid assets are profitable, they can also be deceiving.
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