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Time To Fill Your Barrel! How To Invest in Whisky For Beginners
Ruby Layram
7th May 2024
When people think about investing, their mind often jumps straight to stocks or housing. However, there are plenty of alternative ways to invest your money in 2024.
One type of investment that has been trending across the web recently is Whisky. This underrated asset is free from capital gains tax in the UK and is a good way to diversify – and maybe even put your knowledge of Jack Daniels and Coke to good use!
But how can you invest in Whisky in the UK?
In this guide, we will take a look at Whisky investing, how to do it, and whether or not it is a good idea in 2024.
- What does investing in Whisky involve?
- How to invest in Whisky step-by-step
- Is investing in Whisky a good idea?
- Will Whisky do well in 2024?
What does investing in Whisky involve?
When you started reading this guide, you might have thought that we were talking about investing in Whisky through stocks and shares.
While this is one way to invest in Whisky companies, in this guide we are going to look at investing in whisky casks.
You can think of investing in Whisky casks a bit like investing in physical gold. Instead of buying a stock, you buy the physical product which means that you own the asset directly.
Don’t worry, you won’t have to store huge casks of Whisky in your shed! You can have your Whisky cask stored for you in a wharehouse.
If the casks that you own go up in value, you make tax-free gains.
How to invest in Whisky step-by-step
Investing in Whisky casks is understandably different from investing in stocks and shares.
Instead of investing through an online brokerage, you will need to find a reputable Whisky cask merchant to buy from.
A simple Google search will bring up a list of companies to consider. Always search through the merchant’s guidelines, requirements, and terms before deciding which one to opt for.
Once you have found a reliable merchant, it’s time for a chat! You will be contacted by a member of the merchant’s team to discuss your goals and budget.
You will then be sent a list of casks to choose from. This is where its helpful to know your stuff! Don’t rush this part. Spend time researching the different casks and distilleries so that you can make an informed decision.
The next step is to purchase the casks from the merchant. You will be given a certificate of ownership. Your casks will then be held for you in a HMRC licensed warehouse and you will be able to keep track of their value through your investor account.
Is investing in Whisky a good idea?
Investing in Whisky casks might seem a little more exciting than investing in stocks – especially if you like a drink! But, is it really a good idea?
Like all investments, investing in Whisky comes with risk and there is no guarantee that the value of your investment will go up.
Let’s take a look at both the advantages and disadvantages of Whisky investing.
Also read: The Essential Guide to Risk Management
Why you might want to consider investing in Whisky
Tax-free gains
As we’ve already mentioned, any gains that you make on your whisky investment are free from tax in the UK.
This is because Whisky casks are classed as a ‘wasting asset’.
What does this mean? Whisky barrels are made of wood which is porous. This means that small amounts of Whisky evaporate into the air over time so the volume of Whisky in your cask will decrease. This is called the ‘Angels share’.
As a result, any profits that you make will be tax-free!
Hedge against inflation
Just like gold, Whisky is considered to be a hedge against inflation. This means that the value of Whisky increases at a faster rate than inflation in the UK.
Investing in these types of assets is a good way to keep the value of your wealth. By putting money into an inflation hedge, you can stay ahead of rising inflation rates.
However, there is no guarantee that the value of your investment will go up.
Diversification
Investing in Whisky is a good way to diversify your portfolio with an asset that isn’t stocks or shares.
Read: The importance of holding a diverse portfolio
Diversification lowers the risks that are involved with investing by spreading your wealth across different industries. If one industry takes a hit, it will only affect a small part of your portfolio.
The Whisky cask market operates very differently from the traditional stock market. The price of barrels is mainly influenced by scarcity and demand – which are both quite high right now!
The risks of investing in Whisky barrels
It is important to understand that no investment comes without risk – including whisky.
Here are the potential downsides of investing in the drink.
Risks of damage in storage
One of the biggest risks of investing in Whisky casks is the risk of damage that could happen in storage.
Fires aren’t uncommon, and neither is water damage or the impact of poor storage conditions. You should always choose a reputable merchant who provides safe storage for your Whisky barrels. Also, look for companies that offer insurance.
Fluctuating demand
The value of Whisky is influenced by demand. The more people are willing to pay for expensive bottles, the higher their value will be.
However, if demand for expensive Whisky drops, the price of the drink could also go down.
This is a risk that is involved with any kind of investment. Before you invest, consider whether or not people currently have money to spend on expensive drinks.
Scams
Unfortunately, not all Whisky sellers can be trusted. Some sellers may attempt to sell counterfeit, or non-existent casks, in a bid to take your money.
For this reason, you should always use a reputable seller that operates under a well-known name and has excellent customer testimonials.
Do your research before you invest!
Will Whisky do well in 2024?
Before you make any investment decisions, it is important to review the potential of an asset. Let’s take a look at the possibilities for Whisky in 2024.
According to a report by The Bordeau Index, the Whisky market is currently on an upward trajectory that will continue throughout 2024.
The report noted that Macallan Whisky performed better in cask than it did in bottlings and other strong performers were Springbank, Balvenie, and Dalmore.
There is also an increasing interest in Whisky, and other Western spirits, amongst China’s middle class. A BBC report found that female drinkers from China are opting for Western spirits over the traditional Baijiu drink – which has a VERY high alcohol content of 60%!
So, it seems like 2024 could be a good year for the value of Whisky. But, it is still important to consider the risks that are involved before you invest!
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MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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