Liquid Gold: Investing in Alcohol

Spirits, beer and wine have long been capitalised by individuals and companies for the past several hundred years. While the majority of wineries are privately owned, many distillers and brewers are now publicly traded. While the trading of fine wine has long been popular amongst serious collectors willing to drop thousands of dollars on a bottle, the liquor world is slowly catching up to the game as demand continues to grow at exponential rates.

Despite all the, potential, however, not many people have jumped on the liquor wagon despite its promising growth. One of the main reasons is due to the label alcohol is associated with in the trading market; technically speaking, alcohol is considered a sinful investment.

According to the Investopedia dictionary, a sinful stock is defined as: "Stock from a company that is associated with (or is directly involved in) activities considered unethical or immoral.” Essentially, those who are strong advocates for responsible investing might find sinful stocks a no-no to play around with due to their potential toxic nature. Other sectors deemed as sinful investments include gambling, tobacco, sex and defence industries.

When it comes to the trading market, one can always count on its volatility. Yet, if there’s one thing that can be counted on, it’s society’s struggles with sin. When it comes to ethics and morality, there is no universally accepted definition of what is or what isn’t ethically or morally sound. That is why there is a grey line when people deal with sinful investments such as alcohol, because of the the definition of it as a sinful stock is questioned.

In terms of returns, it cannot be denied that the liquor world provides respectable returns during economic prosperity as well as economic slumps. An example can be seen when the S&P fell by nearly 20 percent from June 2001 to June 2002, while major sin sectors gained between 8-20 percent in return. The numbers show that the returns in alcohol investments are promising.

If you are thinking of investing in alcohol, there are several ways you can do so. One way is to purchase stocks from investment firms, who have made it easier for you to invest in sinful companies while they get instant diversification in their portfolios. Credit Suisse, Merrill Lynch, First Boston and other top mutual funds offer investments along these lines.

Another way is to purchase the actual spirits themselves just as wine traders do. While spirits trading can be a fun way for a savvy buyer to diversify his or her portfolio, it is not for the inexperienced.Things spirit investors need to take into account are: Buying at the right time, spending what you can afford to lose and proper protection of said bottle investments.

Whether or not you agree with sinful investing is your own choice, but the likelihood of vices that continue to nurse people’s bad habits are not going anywhere anytime soon. Depending on your outlook on investment in alcohol, one thing is for sure: Liquid gold is here to stay with prices appreciating everyday.