Methods For Investing In Recession-Resistant Assets: Bourbon Barrels

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Jerremy Alexander Newsome is one of the leading global minds on stock market education and serves as the CEO of Real Life Trading.

A few months back, I began a quest with some fellow investors to identify a “recession-resistant” asset. We decided that finding something “recession-proof” was not a reasonable goal, so we lowered our expectations and got to work.

At that time, the stock markets were extremely high, recession was looming and it was inevitable that interest rates would increase. Anticipating that the change in rates would cause the stock market to drop, we began exploring alternative investments that would not react negatively.

Fine art was suggested but quickly rejected as we decided it was too speculative. Crypto was also suggested; at that time, Bitcoin was selling for approximately $60,000. The consensus was crypto would be a smarter move after Bitcoin saw a drop and pullback.

After some additional exploration—which included a discussion about the merits of investing in rare books—we discovered an asset class that stood out from the rest. It was something I hadn’t heard of before, and I invested in assets for a living. Still, the more I learned about it, the more I liked it. The asset in question? Bourbon barrels.

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Yes, I’m talking about real wooden barrels full of bourbon, the alcoholic beverage often associated with Kentucky that distilleries have been producing from corn since the 1700s. Bourbon is what is known as a “cask-finished spirit,” which means it is aged in a barrel before being sold for consumption. Barrel aging gives bourbon its distinctive taste. It also creates an opportunity for barrels full of bourbon to be purchased by investors.

To understand how this works, you need to understand that the distilleries producing bourbon are not necessarily producing a particular brand of bourbon. In fact, brands often purchase cask-aged bourbon from a variety of distilleries, blending them to get their signature flavor.

During the aging process, two things happen. First, the barrel sits, undisturbed, in a warehouse. The minimum amount of time bourbon typically sits in a charred oak barrel is two years. Most brands, however, age bourbon for at least four years. In some cases, bourbon is aged for more than a decade.

The second thing that happens during the aging process is the value of the bourbon increases at a fairly impressive rate. When I learned this, I saw the potential for bourbon barrels as an investment. If you are interested in adding some barrels to your portfolio, here are three tips on how to start investing.

1. Don’t be in a hurry to buy.

Bourbon has a long and celebrated history. Investing in bourbon barrels does not. Google “invest in bourbon barrels,” and you will discover a growing number of companies that want to sell you their barrels or help you to buy barrels. Before you give your money to any of them, take some steps to assure yourself that they are trustworthy.

Just like investing in cryptocurrency, investing in bourbon barrels is not a practice regulated by a government watchdog. There is no BrokerCheck that you can use to quickly make sure a vendor or investment specialist is legit, meaning you will need to do some homework. Reading customer reviews is a great place to start. Positive press on a company is another good sign. Overall, you want to avoid anything that looks shady or suspicious, which leads me to my second point.

2. Avoid scams.

Yes, bourbon barrel investing scams exist, and they look a lot like other investment scams. If you find an offer that promises an ROI that sounds too good to be true, it is. You will find offers that guarantee returns. Guarantees in an investment like this don’t exist. You will also find offers that promise annual returns. When it comes to bourbon investing, this is not an applicable factor.

As the popularity of bourbon barrel investing grows, so will the number of scammers out to prey on interested investors. To avoid them, keep in mind that you are investing in an alternative asset, not a pyramid scheme. It is an opportunity to make money, but not quick money, which leads to my third point.

3. Don’t be in a hurry to sell.

Bourbon barrels definitely belong in the long-term investment category as their value is found in their age. Right now, you can purchase bourbon for approximately $1,600 a barrel. Selling those barrels in two years for $3,000 apiece is a reasonable expectation based on past performance of the market. While that is not a bad return, it does take patience.

In addition, liquidating your barrels is not as simple as clicking “sell.” It could take a little time for you to find the right exit deal. If you can’t find a buyer in two years, I recommend you wait and watch the barrels continue to increase in value. While you wait, you are spending approximately $60 per barrel per year to store them in a modern, climate-controlled steel warehouse equipped with a fire suppression system.

Every investor’s dream is an asset that requires very little work, requires very little maintenance, goes up consistently over time and pays royally and frequently. From what I’ve seen, bourbon barrels fit that description. At the very least, if the market tanks, you won’t find yourself over a barrel.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


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