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Why Investing in Whiskey is a Rich Person's Game (And Why You Should Play Too)
You may have heard that investing in fine wine is a hobby reserved for the wealthy, but have you considered investing in whiskey? The whiskey investment scene exploded in 2019 after an investor sold a 60-year old cask of Macallan for 1.5 million GBP ($1.65 million), so it turns out that investing in whiskey can be just as lucrative and enjoyable as investing in wine.
But why do rich people invest in whiskey, and should you join in on the fun? Let's take a closer look.
Why Do Rich People Invest in Whiskey?
First and foremost, rich people invest in whiskey because they can afford to. Buying a cask or a bottle of rare whiskey can cost thousands of dollars, and building a collection can be a significant financial investment. But for the wealthy, the cost is not a deterrent – it's a small price to pay for the enjoyment and potential financial gain.
But it's not just the cost that attracts rich people to investing in whiskey. Whiskey, like fine wine, can increase in value over time due to its rarity and demand. As certain whiskeys age and become harder to find, their value can increase significantly. This makes investing in whiskey a potentially lucrative endeavor for those who have the resources to do so.
Another reason why rich people invest in whiskey is for the enjoyment and prestige that comes with owning rare spirits. Whiskey connoisseurs and collectors take great pride in their collections and enjoy showing them off to friends and colleagues. Investing in whiskey also allows rich people to indulge in their passion for fine spirits and be a part of an exclusive community of collectors.
Investing in Whiskey and Wasting Asset Capital Gains Taxes
Traditionally, with capital gains on an investment comes taxation. When you sell a traditional investment, be it stocks, bonds or real estate, you typically have to pay a percentage of your gain in tax, called "capital gains tax." These vary from asset to asset, and depend on how long you've held the asset, or how much you've made on the appreciation.
Whiskey, however, is a different story. Whiskey is a drink, first and foremost, and is therefore not classified as a traditional investment. Whiskey is classified as a "wasting asset," meaning that it has a typical shelf life of less than 50 years. As such, whiskey is not subject to any capital gains tax, making this an excellent hiding place for rich people who don't want to get hammered on taxes!
But Is Investing in Whiskey Right for Everyone?
While investing in whiskey may be a rich person's game, that doesn't mean it's not accessible to the average person. If you have a passion for whiskey and are willing to invest the time and money, there's no reason why you can't join in on the fun.
Here are a few things to consider if you're thinking about investing in whiskey:
Do your research: Investing in whiskey is not as simple as buying a bottle and hoping it increases in value. Typically, you'll look into investing in casks, rather than bottles off the shelf of your nearest liquor store. You need to do your due diligence and research the whiskey market to find the best investments. Look for rare and sought-after whiskeys that have the potential to increase in value over time, and investigate the small batch scene.
Be prepared to wait: Investing in whiskey is a long-term game. Don't expect to see a return on your investment overnight. It can take years for a whiskey to increase in value, so be prepared to hold onto your bottles or casks for the long haul.
Don't forget to drink: While investing in whiskey can be a financial pursuit, it's also important to remember that it's a spirit meant to be enjoyed. Don't be afraid to crack open a bottle and savor the flavor – it's all part of the experience.
Why Investing In Whiskey Could Be a Smart Financial Decision
In addition to being a fun and enjoyable hobby, investing in whiskey can also be a smart financial decision. Here are a few reasons why:
Whiskey is a tangible asset: Unlike stocks or other investments that exist purely in the digital realm, whiskey is a tangible asset that you can physically hold onto. This makes it a more secure investment, as you don't have to worry about the value disappearing overnight due to market fluctuations.
Whiskey has a proven track record of increasing in value: As mentioned earlier, certain whiskeys have been known to increase significantly in value over time. Does this mean your plastic bottle of Canadian Club you bought in college is going to skyrocket? Probably not. However, price appreciation is especially true for rare and sought-after whiskeys that are no longer in production.
Whiskey can be a hedge against inflation: Inflation is a natural occurrence that causes the purchasing power of money to decrease over time. By investing in tangible assets like whiskey, you can potentially protect yourself against the effects of inflation.
Whiskey can be a fun and enjoyable hobby: Investing in whiskey can be a fun and enjoyable hobby, especially if you have a passion for fine spirits. Not only do you get to drink and appreciate a quality product, but you also get to watch your investment potentially grow in value over time.
How to Get Started with Investing in Whiskey
If you're interested in investing in whiskey, here are a few tips to get you started:
Learn about the different types of whiskey: There are many different types of whiskey, each with its own unique flavor profile and production process. Familiarize yourself with the different types and learn about their histories and production methods.
Find a reputable dealer: When it comes to investing in whiskey, it's important to find a reputable dealer who can provide you with authentic and high-quality bottles. Look for dealers with a good reputation and a track record of providing authentic and well-preserved bottles.
Start building your collection: Once you have a good understanding of the whiskey market and have found a reputable dealer, it's time to start building your collection. Start with a few bottles and focus on acquiring rare and sought-after whiskeys that have the potential to increase in value over time.
Take care of your bottles: Proper storage and handling is crucial for maintaining the value of your whiskey collection. Keep your bottles in a cool, dark place and handle them carefully to prevent damage.
Investing in whiskey can be a fun and rewarding hobby for those with an appreciation for fine spirits and an eye for potential financial gain. Whether you're a wealthy connoisseur or an average person looking to indulge in a new hobby, investing in whiskey can be a smart and enjoyable decision. So why not give it a try and see where it takes you? Cheers!
