As an investor, you should keep in mind that every investment comes with its share of risks.
When it comes to investing in whisky, the risks are varied. The type of whisky you invest in will determine the level of risk you’re likely to face.
When investing in whisky bottles, the risks can be high. Firstly, one of the most common risks are fake bottles. As the market expands, selling fake bottles has become a multi-million-pound industry. Before starting to invest in whisky bottles, spend time researching how to recognise a fake bottle.
Another high risk of whisky bottle investment is the potential for a significant drop in value. A bottle of whisky you decided to invest in years before could drop in value in the next few years causing you to lose a lot in return. However, the right bottles from the right distilleries will offer you a strong investment proposition. It’s just important to do your research ahead of making any decisions.
When you’re investing in casks, the risks are somewhat lower as you can pretty much always find an exit strategy. Whether it be private investors, bottlers or distilleries in need of blends. However, this does not mean that casks investments face no risk at all.
One of the risks of investing in cask is theft or damage to your cask. This is why it’s important to store your casks in a safe place. All of our casks are stored in HMRC registered bonded warehouses, and are fully insured. If anything were to happen to your cask, the insurance would cover it up to the market value.
Another risk of investing in a cask would be not checking regularly on your cask. Alcohol evaporates much faster than water, causing the ABV (Alcohol By Volume) to drop. Whilst this evaporation, also known as ‘The Angel’s Share’ offers benefits in the terms of no capital gains on profits (as HMRC considers it to be a ‘wasting asset’) it is important to monitor casks regularly. Whisky must have at least 40% ABV to be considered whisky so it’s important to check both the level and strength of your whisky. Luckily, HMRC will be like a ‘monitor’ for you as if it evaporates by more than 2% per annum the Exchequer will suffer due to lost excise, so there are checks and balances everywhere.
Not letting your cask mature for long enough or letting it mature for too long can also be a cause of a potential low return. When it comes to whisky it’s all about timing. At the right time, the right cask can make you tens of thousands of pounds profit.
Choosing the right cask material can also help lower the risk on your investment. The oak the whisky is going to mature in is important, as the cask itself influences the taste (and value) of the whisky. A bad cask will make a bad whisky. If you’re buying from a reputable distillery or investing company there’s no need to worry, and we offer advice on the types of cask to be looking out for.
To conclude, despite all the great upside potential, there are some risks when investing in whisky,and no investment is ever risk free. Fortunately, with all the HMRC regulations and monitoring and the massive demand for branded, Scotch whisky worldwide in terms of the risk/return payoff, whisky cask investment comes up Top Trumps! Despite all this, we recommend that you do your research. Here at MacInnes the most important thing is that you do not feel rushed into buying a cask and to this end we will undertake the buying journey with you, and over several phone calls if needed so that you are 100% informed and happy before investing your money.
To start on your whisky cask investment journey, download our guide below, or if you’d like to speak to one of our specialists, email email@example.com
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Read through your copy of the MacInnes whisky investment guide and learn more about the market and the whisky investment process.