Wine investment versus whisky investing
Comparison of whisky and wine investing
Although different in taste and alcohol content, wine and whisky share some similarities during their production and maturation processes and many similarities in the way each has become an investable asset.
There are several ways in which private investors can directly and indirectly gain exposure to the potential profits within the wine and whisky drink sector.
How to invest in wine and whisky
Why invest in wine or whisky?
Some investors have a passion for wine or whisky, and their deep knowledge provides an advantage when evaluating different grape varieties, terroir, Chateau, vintages, Distilleries, regions and casks.
Most investors in wine and whisky are unlikely to have the same detailed level of knowledge as an industry insider or the experienced investor. But this should not preclude private investors from taking a look at these alternative physical asset investments.
Before proceeding with a whisky or wine investment, there are a few key points to understand and look out for.
When investing in physical assets such as wine or whisky held at arm's length, it is essential that your ownership is proven, and that the investment asset is not recorded as anyone else's asset. Check that it doesn't appear on your provider's own business balance sheet. A reputable investment provider should regularly provide a third-party statement, showing all holdings and proving investor ownership.
Investors should expect to pay storage fees for their wines and whiskies, because specialist bonded warehousing is not free. In fact, payment of such fees has been decisive in proving ownership in law in the past. These charges could impact the profitability of your investment, so the lower the monthly storage fees the better. The storage provider must also satisfy all HMRC requirements and assist in organising any Duty and VAT payments due as bottles leave bonded storage.
Selling should always be as easy as buying
Before buying any investment asset it is critical to understand how quickly the investment can be sold, the costs involved and the speed with which funds are returned. A reputable investment service provider should welcome clients testing their procedures for selling and withdrawing funds.
Please note in an auction there is unlikely to be a deep pool of liquidity and realising investment gains may take longer than expected.
How to spot a scam
There have been several financial scams in recent years with authorities seemingly unable to keep pace with the fraudsters. WhiskyInvestDirect’s sister business BullionVault provides a useful article explaining the 7 signs of an investment scam.
One reason for the growing interest in whisky and wine as alternative investments is the way they can be presented to UK tax authorities as a wasting asset – that is, an asset with a predictable life of 50 years or less. These wasting assets are with some exceptions generally free from UK Capital Gain Tax (CGT).