I’m 19 years old and have about £200 to invest. I already have a few rare whisky bottles but I want to take it to a higher level. Any suggestions?
First of all, any investment decisions you make should be based on your personal circumstances, financial objectives and attitude to risk.
For many younger people who are starting out with investing, it makes sense to first build some cash savings, to cater for any short-term emergencies or requirements where you might need money at short notice.
Beyond this, because you are young and have plenty of time to pull back any short-term losses, you can often take quite a high degree of risk by investing in the stock market.
Investing in whisky products is also likely to involve a high degree of risk, but this isn’t an approach that we would recommend to our clients.
While there can seem a good case for investing in whisky, it is important that investors fully understand the significant downside risks. These investments are unregulated, which means that investors cannot fall back on the Financial Services Compensation Scheme or any other body if anything should go wrong. They are also illiquid (no pun intended), so you may not be able to sell them when you want to and at the price you want.
In addition, they don’t produce any earnings or income, and so price movements are based solely on supply and demand. This means there can be some big upward or downward fluctuations if there are changes in the economic environment or if certain types of asset come in or out of favour.
So what you get is an investment that is unregulated and illiquid, with a potentially volatile performance and one that produces no income. This isn’t attractive to most investors.
You should really only look at investing in whisky if you’re doing it as a hobby or collection rather than if you’re serious about investing for the future.
Instead, I would recommend investing in low-cost tracker funds, such as the HSBC FTSE All Share Index fund, which tracks the UK stock market, or diversified global equity funds to spread risks, such as Rathbone Global Opportunities or Schroder QEP Global Core. You can hold these in a tax-ef cient individual savings account (Isa) wrapper.