The Financial Case for Investing in Collectibles: Risk, Reward, and Rarity

Collectibles are tangible items that investors feel will hold their value and gradually appreciate in value over time. Examples include pieces of art, antiques, sports memorabilia, and cask whisky. Each of these is a tangible item that can be enjoyed in its own right by those who are passionate about them in a way that stocks and shares do not typically offer. That said, it’s essential that every investor considers risk, reward, and rarity before making an investment. 

Understanding The Risks Of Collectibles 

We need to start by highlighting the fact that the value of a collectible is highly subjective in a way that a stock in a listed company is not. Nostalgia, personal taste, and media exposure can all create strong shifts in value at certain points, and all in a way that is typically disconnected from the behaviour of the wider economy. In addition to this, investors need to be aware that there are scams operating that are designed to take advantage of the passion investors have for a particular class of collectibles. 

“Cask whisky is an exciting and unique asset, but as with everything, it’s important to go with your eyes fully open,” says Alphie Valentine, Co-founder of Hackstons, established whisky specialists who provide opportunities for both investment and consumption. Hackstons are renowned for an approach that brings 100% transparency to every investment, allowing investors to understand the provenance of each cask. They are also given a Delivery Order as proof of ownership, and have the option to visit the storage facility in person and ask any questions about the wider industry. 

The Potential Rewards Collectibles Offer

The obvious point to make here is that whisky enthusiasts will be able to dive deeper into their passion and learn more about an industry they are interested in. Following your passion, tapping into a feeling of nostalgia, and feeling like you are going on a journey are all things to be enjoyed and valued, but the value of such investments goes far further. 

Portfolio diversification is something every financial adviser will highlight the importance of, and investing in collectibles is a proven way to do this. Because the value of cask whisky is largely disconnected from government economic policy and the behaviour of the wider economy at any given time, such investments can enhance the stability of a portfolio. This is particularly important during prolonged periods of market turmoil and economic uncertainty. 

The tangible nature of collectibles means that they provide a sense of security and reassurance that you may not get from an abstract entity such as a share or bond. Interestingly, the tangible nature of cask whisky means many investors feel more secure in their investment, and further to this, there is plenty of evidence that it can increase in value during periods of unwanted inflation in the wider economy. For this reason, some investors choose to use such investments as a way to hedge against the erosion in wealth that inflation can bring. 

Rarity And Long-Term Holds 

We need to begin this section by highlighting the fact that there is no such thing as a guaranteed return, regardless of the type of collectible. However, one thing we can say about cask whisky is that, generally speaking, it becomes rarer over time. Prestigious distilleries may carefully gauge their level of production to avoid flooding the market and crashing the value of what they’re producing. Further to this, maturation is an inherent value driver of cask whisky. As whisky ages in the barrel, it matures, and this typically adds value. You only need to take a look at your local supermarket to see that a 30-year-old is more expensive than a 20-year-old of the same brand.

Whisky often tends to appreciate the longer it is in the barrel because it is naturally ageing and maturing in a way that cannot be artificially accelerated. The result is a tangible asset whose supply cannot be quickly increased to meet a sudden growth in demand. We also need to take into account that a certain amount of cask whisky that is in the market will be bottled and consumed each year. After all, it is something that is made to be enjoyed, not just something that is there purely to grow in value. 

Choosing The Right Collectibles 

Transparency, verification, and provenance are essential when you want to be able to invest in collectibles. You can never guarantee a return, but failing to perform due diligence before making an investment will virtually guarantee a higher level of risk exposure than was initially anticipated. The nuances and subtleties of the cask whisky market mean that connecting with an expert is essential. To do this, investors need to find a company with a track record and an established profile. 

As well as offering cask investment, Hackstons have a Knightsbridge store in London, and were recently nominated for ‘Newcomer of the Year’. Their team adopts a pragmatic approach that is guided by real-world insights on the performance of similar casks over similar timeframes, which is key to understanding the opportunity. Only then can investors make informed decisions about the positions they want to adopt and the amount they wish to invest.