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Risks & reasons to invest in whisky

There is no guarantee that investing in whisky will make you money. Naturally there are risks. But there are many reasons for investing in whisky maturation.

 

Risks which you accept when you invest in whisky Reasons for investing in whisky
  • The market price for the whisky you are maturing may fall. 
  • Your whisky may become difficult to sell if it has become too old, or too scarce, to be useful in a blend, while not being thought good enough to be bottled as a single malt.
  • Your whisky could be destroyed or stolen. In either case you would receive a payment from insurers, which would ordinarily represent the loss-adjusted true and fair value of your whisky, although this might not be as much as you thought it worth.
  • There is a risk of WhiskyInvestDirect's insolvency.
    Please see the Safety FAQ on our homepage 'What would happen if WhiskyInvestDirect failed?' to learn how your whisky, which is your exclusive legal property, addresses this risk.
  • We cannot list all risks in the real world.  The above are only some of the risks, and there may be others.
  • Whisky is a commodity which through time gets both better and – for any given age – scarcer, which tends to mean it becomes more valuable.
  • The historical data shows that the average net annual return on 8 year old malt whisky bought from new and sold in the period 2013-2022 was 11.8% p.a.
  • The major independent whisky research analysts forecast continued steady demand growth, correlating with a worldwide demographic expansion in the number of whisky's principal customer base, which is prosperous, middle-aged men. The consensus is that global consumption will grow at around 2% per annum for the medium term.

  • You will be supporting a major British industry.

    More than 90% of Scotch production is sold abroad, generating 25% of all British food and drink exports. The industry employs 42,000 people in the UK.

  • Scotch has a wider international customer base than any other spirit beverage. Its fortunes are not closely correlated to any one national market.

  • During an era of excess capital, generally earning reducing yields, the Scotch industry is unusual in finding it difficult to attract finance for its working capital needs.

    This is because small scale producers, long periods of maturation, and uncertainty in the value of the end product all discourage banks and professional investment managers.

    Although the major producers can access bond markets, mid-size and smaller independents cannot. This is what forces many producers to pay high borrowing costs to the bank.

  • Because the government takes £3bn a year in taxes on whisky sales, it takes care to monitor the bonded warehouses very closely. This keeps the storage system honest and the insurance premiums low.

  • Tax which you would pay on bottled whisky is £31.64 per litre, many times the cost of new whisky spirit in a barrel.

    The absence of tax during maturation leaves the money you invest in barrel whisky working more efficiently than it would in bottled whisky, where much of your investment is sunk in tax already paid to the government, which does not appreciate.

  • Because over 90% of it is sold for export Scotch whisky should offer excellent protection against future weakness in Sterling and the British economy.
  • Unlike a deposit in a bank, which is government-insured to a cap (of £85,000) whisky undergoing maturation and owned through WhiskyInvestDirect is independently underwritten without a cap, so your property's safety is not capped - as it would be through deposit protection.
  • Maturing whisky is exceptionally unusual in being a physical product in which you can invest without paying VAT.

  • Whisky offers you a way of storing wealth in a commodity which, being 100% physical, operates independently of the financial markets. Indeed, you probably have no other investment which is capable of being sold for consumption.

    In this way whisky diversifies your investments away from dependence on the financial system itself.

    As it happens this is why your purchase of whisky is regulated under well-understood commercial law, rather than much more complex financial law.

  • In the statistically unlikely event that your investment goes badly wrong you can bottle it, pay the tax, and enjoy it.

 

 

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