DarkRange55
We are now gods but for the wisdom
- Oct 15, 2023
- 1,989
Collecting spirits such as whisky or rum as an investment is highly speculative and fraught with challenges that make it a poor substitute for traditional financial assets. Liquidity is poor, and fees are substantial. Selling a bottle usually means consigning it to auction, waiting weeks for settlement, and absorbing commissions and premiums that can easily exceed 15–20% of the hammer price once buyer and seller charges are counted. Unlike equities, spirits are physical goods: bottles can suffer ullage (slow evaporation), cork degradation, light damage, or outright spoilage if not stored carefully. Maintaining them in good condition requires upright storage in a cool, dark, stable or environment, climate-controlled facilities, dedicated insurance, and space—all of which create ongoing annual costs that steadily drag on returns. Even with perfect storage, spirits don't generally appreciate fast enough to offset these frictions, and unless one builds a very diverse collection of highly desirable bottles, the risk of underperformance or outright value loss remains high. The time commitment adds another hidden cost—hours spent driving to shops, entering lotteries, and waiting in lines for scarce bottles all subtract from future returns.
The drinks business is also cyclical and volatile. Whisky prices soared during the recent boom of the 2010s and early 2020s, but by 2023 rare-whisky indices fell by about 9% and auctions slowed, showing how quickly momentum can reverse. Which bottles you acquire is absolutely critical: some rise in value dramatically, while many others stagnate. To succeed, an investor needs deep insider knowledge, established relationships with distributors, or lottery allocations—otherwise they are stuck at the back of the line paying inflated "sucker" prices. Even defining "rare" is not straightforward; a 20- to 30-year-old whisky is not inherently valuable. Collectibility depends on brand prestige, release size, packaging, reputation, and cultural cachet, not just age. A newcomer without expertise would likely spend years learning these subtleties before having any chance at consistent success.
From a financial perspective, the comparison with mainstream investments is sobering. Consider compounding: $40 invested in an index fund at 7% annually becomes around $150 after twenty years. To match that with a bottle of spirits requires exceptional luck and repeated correct picks—something few collectors achieve. Even among successful enthusiasts, collections that appreciate significantly are more passion projects than serious retirement strategies. Some rums, such as Caroni (a closed distillery with finite stock) or Appleton Estate's limited-edition 17-Year Legend, may hold or rise in value, but their prices are already so inflated that further appreciation is constrained. Much like luxury watches, bottles can function as collectibles or status goods, but as financial vehicles they rarely deliver consistent, risk-adjusted returns.
In the end, while a handful of extremely rare spirits may perform well in niche cases, for the vast majority of investors the stock market offers far superior liquidity, compounding, and reliability. Spirits collecting can be rewarding as a hobby or passion pursuit, but it should not be mistaken for a sound long-term wealth-building strategy.
Luxury watches are often marketed as "investments," but in practice they behave much more like cars than financial assets. Fashion shifts quickly, and there is no guarantee that future generations will value mechanical watches the way current enthusiasts do. If the cultural base erodes, demand can collapse. On top of that, high-end watches require periodic servicing—Rolex recommends roughly 10 years between services depending on use, while Patek Philippe suggests 8–10 years—and service costs for complicated models can run into the thousands. Add insurance, storage, and the ever-present risk of theft or damage, and these recurring expenses weigh heavily on long-term returns.
A true investment should generate real, inflation-adjusted gains. Very few watches manage this. Some models hold their value reasonably well, and buying pre-owned can sometimes allow an owner to break even, but once maintenance and transaction costs are included, most watches are slowly depreciating assets. Liquidity compounds the problem: selling often means consigning to auction—where buyers pay a hammer price plus premiums and taxes, and sellers pay commissions—or using marketplaces that charge significant fees (for example, Chrono24 at ~6.5%, or eBay at 15%/6.5%/3% by tier). In addition, "grey-market" discounts of 20–30% below MSRP on many references (with premiums only on a few hyped models) highlight just how wide the gap can be between notional market prices and what sellers actually realize.
The market itself is narrow and highly cyclical. Unless you can secure allocations of the most coveted references—certain Rolex, Patek Philippe, or Audemars Piguet models—you're generally not "in the game." Even then, wearing a watch and leaving a scratch can erase much of its paper gain. The post-pandemic correction illustrates this risk: secondary-market prices have fallen for multiple consecutive quarters since 2022, with indices, auction data, and market reports all pointing to ongoing declines and a cooling from bubble-era highs. The comparison to mainstream investments is stark: a 10-year chart of virtually any watch alongside the S&P 500 with dividends reinvested shows equities comfortably ahead. To justify the disadvantages of watches—illiquidity, servicing costs, stylistic risk, theft, and depreciation—a watch would need to outperform equities by a wide margin, something few models achieve consistently.
The bottom line is that exceptions exist. Certain Rolexes, Patek Philippes, or historically significant vintage pieces have appreciated strongly, but they are difficult to access and even harder to predict. For most people, watches are best understood as an expensive but rewarding hobby—objects that may occasionally recoup part of their cost, but not robust vehicles for long-term wealth building. If you buy, buy because you love the watch and want to wear it; if you invest, choose financial assets designed for compounding, liquidity, and reliability.
Rolex index is interesting. Berry Ritholtz looks at watch prices a lot.
en.wikipedia.org
watchcharts.com
The drinks business is also cyclical and volatile. Whisky prices soared during the recent boom of the 2010s and early 2020s, but by 2023 rare-whisky indices fell by about 9% and auctions slowed, showing how quickly momentum can reverse. Which bottles you acquire is absolutely critical: some rise in value dramatically, while many others stagnate. To succeed, an investor needs deep insider knowledge, established relationships with distributors, or lottery allocations—otherwise they are stuck at the back of the line paying inflated "sucker" prices. Even defining "rare" is not straightforward; a 20- to 30-year-old whisky is not inherently valuable. Collectibility depends on brand prestige, release size, packaging, reputation, and cultural cachet, not just age. A newcomer without expertise would likely spend years learning these subtleties before having any chance at consistent success.
From a financial perspective, the comparison with mainstream investments is sobering. Consider compounding: $40 invested in an index fund at 7% annually becomes around $150 after twenty years. To match that with a bottle of spirits requires exceptional luck and repeated correct picks—something few collectors achieve. Even among successful enthusiasts, collections that appreciate significantly are more passion projects than serious retirement strategies. Some rums, such as Caroni (a closed distillery with finite stock) or Appleton Estate's limited-edition 17-Year Legend, may hold or rise in value, but their prices are already so inflated that further appreciation is constrained. Much like luxury watches, bottles can function as collectibles or status goods, but as financial vehicles they rarely deliver consistent, risk-adjusted returns.
In the end, while a handful of extremely rare spirits may perform well in niche cases, for the vast majority of investors the stock market offers far superior liquidity, compounding, and reliability. Spirits collecting can be rewarding as a hobby or passion pursuit, but it should not be mistaken for a sound long-term wealth-building strategy.
Luxury watches are often marketed as "investments," but in practice they behave much more like cars than financial assets. Fashion shifts quickly, and there is no guarantee that future generations will value mechanical watches the way current enthusiasts do. If the cultural base erodes, demand can collapse. On top of that, high-end watches require periodic servicing—Rolex recommends roughly 10 years between services depending on use, while Patek Philippe suggests 8–10 years—and service costs for complicated models can run into the thousands. Add insurance, storage, and the ever-present risk of theft or damage, and these recurring expenses weigh heavily on long-term returns.
A true investment should generate real, inflation-adjusted gains. Very few watches manage this. Some models hold their value reasonably well, and buying pre-owned can sometimes allow an owner to break even, but once maintenance and transaction costs are included, most watches are slowly depreciating assets. Liquidity compounds the problem: selling often means consigning to auction—where buyers pay a hammer price plus premiums and taxes, and sellers pay commissions—or using marketplaces that charge significant fees (for example, Chrono24 at ~6.5%, or eBay at 15%/6.5%/3% by tier). In addition, "grey-market" discounts of 20–30% below MSRP on many references (with premiums only on a few hyped models) highlight just how wide the gap can be between notional market prices and what sellers actually realize.
The market itself is narrow and highly cyclical. Unless you can secure allocations of the most coveted references—certain Rolex, Patek Philippe, or Audemars Piguet models—you're generally not "in the game." Even then, wearing a watch and leaving a scratch can erase much of its paper gain. The post-pandemic correction illustrates this risk: secondary-market prices have fallen for multiple consecutive quarters since 2022, with indices, auction data, and market reports all pointing to ongoing declines and a cooling from bubble-era highs. The comparison to mainstream investments is stark: a 10-year chart of virtually any watch alongside the S&P 500 with dividends reinvested shows equities comfortably ahead. To justify the disadvantages of watches—illiquidity, servicing costs, stylistic risk, theft, and depreciation—a watch would need to outperform equities by a wide margin, something few models achieve consistently.
The bottom line is that exceptions exist. Certain Rolexes, Patek Philippes, or historically significant vintage pieces have appreciated strongly, but they are difficult to access and even harder to predict. For most people, watches are best understood as an expensive but rewarding hobby—objects that may occasionally recoup part of their cost, but not robust vehicles for long-term wealth building. If you buy, buy because you love the watch and want to wear it; if you invest, choose financial assets designed for compounding, liquidity, and reliability.
Rolex index is interesting. Berry Ritholtz looks at watch prices a lot.
Barry Ritholtz - Wikipedia
Rolex Market Index | WatchCharts
The WatchCharts Rolex Market Index is an indicator of the secondary market performance of Rolex watches. It is composed of the top 30 models within the brand, sorted and weighted by transaction value. The index shows the average market price (in USD) of these 30 watches over time, and is...
watchcharts.com
