Should You Invest in Rare Whiskey? We Analyzed 10 Years of Market Data to Find Out (2022)

Record-high inflation—spearheaded by global supply chain disruptions in China, Russia and Ukraine—is the hottest topic among investors in 2022.

This rapid devaluation has all sorts of second-order consequences like potentially plunging the U.S. economy into a recession. Stocks are down double-digits, U.S. GDP has shrunk for two straight quarters, home prices are plummeting, and consumer confidence is at an all-time low. 

In times like these, intelligent investors hedge their portfolios with assets that historically appreciate in value when stocks and bonds are in decline. Day by day, collectibles (e.g. sports cards) are more commonly being used to hedge against market downturns and inflation. Few collectibles, however, boast a risk-to-reward profile as neat as whiskey’s. 

Whiskey has returned 14.9% over the past year, and has performed the 7th best across 20+ asset classes like stocks, bonds, commodities, cryptocurrencies, and luxury watches. And whiskey’s performance over a longer time horizon tastes even sweeter than that, my friends. 

Sourcing and storing your own whiskey can be time-consuming and expensive though. That’s where platforms like Vint and CaskX make all the difference. Vint lets you invest in expertly-curated, thematic whiskey collections starting at less than $50 per share, while CaskX opens the door to investing in whiskey barrels from leading distilleries across the U.S. and Scotland.

In this study, we used the Rare Whiskey 1000 index to compare whiskey to both traditional assets and portfolio hedges, including stocks, bonds, gold and Bitcoin. Here’s what we learned about whiskey’s performance during both market crashes and inflationary periods.

• Whiskey has returned 8.46% from January to June 2022, failing to keep up with June’s 9.1% inflation rate (just barrel-y). 
• Over the past 3 market crashes, whiskey consistently outperformed every other asset besides gold and bonds. 
• During moderate to high inflationary periods whiskey appreciated by over 20%, far and away surpassing every other asset on this list.
• The only asset that has appreciated more than whiskey over the past 10 years was Bitcoin, but with significantly more downside volatility along the way.

Let’s kick things off by evaluating whiskey’s performance from January to June 2022.

January-June 2022

As you can see, the S&P 500 returned a stomach-churning -20.58% during the first half of 2022. At the same time, however, whiskey was up by 8.46%. Though whiskey hasn’t exactly outpaced inflation, it’s only behind by 0.64%.  Not too shabby, aye? I mean, considering that most everything else is in the red.

Whiskey also outperformed the other stores of value and inflation hedges in this graph, with Gold slipping by -2.84% and bonds collapsing -12.17%. And while crypto natives are hopeful that Bitcoin will one day become a reliable store of value, the asset is still tightly correlated to equities—plummeting -60% this past year.

Anthony Zhang, Founder of Vinovest, on why fine whiskey has performed well:

During the COVID-19 recession, which ran its course from February 2020 to April 2020, the S&P 500 returned -9.73% while Bitcoin did slightly better at -7.40%. Meanwhile, bonds rose by a cool 7.02% and gold by 6.67%.

Hindsight is 20/20. Risk assets were sold off at the onset of the pandemic as investors fled to stores of value like gold. Bonds skyrocketed soon after the Fed began stimulating the economy by cutting interest rates to basically zero, printing trillions of dollars (brrrr) and going on a Treasuries shopping spree.

Whiskey only returned 2.20% during this period. Not bad, but not enough to get me out of bed in the morning either.

September-December 2018

Back during the final months of 2018, the stock market crashed due to a number of factors, including  Trump’s trade war with China.

During all this mayhem, the S&P 500 swan dived -13.61% while bonds remained mostly stable and even moved up an inch. Crypto, though, blew up in spectacular fashion at -46.82%. Gold also surged this time around with gains of 8.7%, but not quite as much as whiskey did at almost 11%.

Average returns (2022, 2020, 2018)

To close this section off, we calculated the average performance of whiskey across all three market downturns. Bitcoin was the worst-performing asset during crashes at a gut-wrenching -38.20%, followed by S&P 500 at -14.64% and bonds at -1.40%.

Whiskey, on the other hand, came out as the best performing asset during recent market crashes. It’s also worth noting that whiskey’s performance beat all other assets in every year except 2020.

Another takeaway from this section is just how respectable gold's returns have been over the past 3 crashes. But all that glitters isn’t, well, gold. That’s because when we look at gold’s performance versus whiskey’s during high inflationary periods, the data tells a whole different story.

Adam Lapierre, Director of Wine at Vint, on whiskey as an asset class:

In previous studies, we looked at asset performances during 4 high inflationary periods including 2022, 2021, 2011, 2008. Unfortunately, the Rare Whiskey 1000 only goes back as far as 2012.

So instead of 2011 and 2008, we’ll evaluate whiskey during 2018—when inflation was a smidge higher than the Fed’s target of 2%.

No need to wonder if that drink hit you a little too hard; you’re not seeing double. Whiskey’s ROI during inflationary periods is, in fact, in the double-digits (20.64%). The S&P 500 is the second-best performer at 4.19%, while the seemingly-solid asset that is gold melted by -2.83%. Not so great after all, no?

This data suggests that whiskey could be the inflation hedge missing in diversified portfolios. Most growth-oriented investors are banking on the fact that risk assets like tech stocks and crypto tend to return double-digit gains during periods of loose monetary policy. But, it’s also worth evaluating: how do those risk assets perform during credit crunches? Poorly, I’m afraid.

One reason why whiskey actually thrives during periods of inflation is that it’s susceptible to supply shocks. And when that happens, whiskey prices jump higher to account for the constant or increased level of demand despite supply chain disruptions, labor shortages and so on. Not to mention, whiskey is a less liquid investment that’s held in storage for many years. Meaning, it’s not subject to violent price swings.

Compare this to highly liquid investments like stocks and crypto where investors panic sell assets at the click of a button and, in so doing, only amplify market crashes.

Lo and behold, the data suggests that on a long-term timeline whiskey only moves in one direction: up and to the right.

The stock market’s long-term performance (76.17%) is also impressive in its own right. Less impressive, though, are long-term gold (8.17%) and bond (-6.73%) returns. Bonds, in particular, have a surprisingly bad track record considering they’re touted as one of the safest assets to invest in.

To no one’s surprise, Bitcoin offers the most life-changing gains by far (5,302.27%)—even beating out whiskey. That is, if your diamond hands are strong enough to keep HODLing during the down seasons (and there are crypto bear markets aplenty).

All in all, whiskey comes out as one of the best risk-adjusted alternative assets to invest in—much like its sister spirit fine wine.

Last up, we’ll be putting all of this theory to the test by evaluating three sample $100,000 portfolios on 1-year and 5-year time horizons.

Portfolio A follows a traditional 60/40 stock and bond split, while Portfolio B throws some whiskey into the mix and Portfolio C adds a pinch of crypto. Let’s see how these cocktails turn out, shall we?

Portfolio A: Traditional 60/40

60% in stocks, 40% in bonds

Portfolio B: Traditional with whiskey

60% in stocks, 30% in bonds, 10% in whiskey
 

Portfolio C: Growth with whiskey

60% in stocks, 20% in bonds, 15% in wine, 5% in crypto

What immediately strikes us is that all three sample portfolios lost money during the past year, weighed down by negative returns in the stock, bond and crypto markets. 

And while Portfolio C (stocks/bonds/whiskey/crypto) saw the biggest loss out of the three, its losses were only 1% greater than that of Portfolio A (stocks/bonds). On the flipside, Portfolio C also saw the biggest upside out of the three, more than doubling the value of its portfolio in five years.

Portfolio A, on the other hand, had the lowest upside of the three. Meanwhile, Portfolio B (stocks/bonds/whiskey) saw the best risk-adjusted returns — dipping less than Portfolio C but producing higher returns than Portfolio A. Numbers-wise, Portfolio B saw 52% upside with only -2% downside. So even if you’re not aiming for maximum growth, the data shows that rare whiskey could keep your portfolio more stable during bear markets.

How ‘bout them apples?

Sources

1. Rare Whisky 101. Rare Whisky Apex 1000. Retrieved August 8, 2022 from MoneyMade.
2. NYSE. S&P 500 (SPX). Retrieved August 8, 2022 from MoneyMade.
3. NYSE. iShares 7-10 Year Treasury Bond ETF (IEF). Retrieved August 8, 2022 from MoneyMade.
4. NYSE. iShares Gold Trust (IAU). Retrieved August 8, 2022 from MoneyMade.
5. Binance. Bitcoin (BTC). Retrieved August 8, 2022 from MoneyMade.
6. MacroTrends. U.S. Inflation Rate 1960–2022. Retrieved August 8, 2022, from MacroTrends.