The sobering truth about ‘exciting’ investments

If you’re hoping to retire in the coming years, or you’ve already accessed a chunk of your nest egg, you can find yourself surrounded by potential investment opportunities.

You start noticing ads in the newspaper promising returns of up to 12% on whisky. There’s a pile of flyers at your door. When you pick them up, one in particular catches your eye: ‘Start your property portfolio today with just £60k’. Everywhere you turn, someone, somewhere, is trying to get you to part with your money.

These may sound like scams, but many of these opportunities are perfectly legal. The big question however is, are they as promising as they may seem? 

What they don’t tell you about whisky

I can see why so many people are drawn to whisky as an investment. Last year, a rare cask sold for £1m at auction, 34 years after it was purchased for just £5,000. 

The ads are enticing too: buy a cask and enjoy returns of 8-12% a year. You’ll have a tangible asset in your name, along with free storage and insurance. No capital gains tax required! 

What the adverts and success stories don’t tell you is that this industry is unregulated. If something went wrong or a fraudster ran away with your nest egg, your chances of getting it back would be slim. This is an investment that could flush decades of work down the drain.

Without the Financial Conduct Authority around to fight your corner, you can’t be sure exactly what you’ll get for your money. Some platforms will offer you the opportunity to invest in the rarest and most expensive whisky, only for your cask to be filled with something you’d find in your nearest Bargain Booze outlet. 

Others will offer guaranteed returns, only for your casks to sell for far less than promised. In some cases, you might find yourself investing in casks that don’t even exist.

What they don’t tell you about property

If you’ve seen the value of your own home skyrocket, I don’t blame you for wanting to replicate that success on a larger scale. You might even be kicking yourself for not building a property empire sooner.

It’s no wonder, then, that so many companies are encouraging you to invest in property. All they need to do is point to the huge growth that the property market has seen over the last 20 and 30 years and they’ll be inundated with potential investors. 

What they don’t tell you is that many investors (even those who’ve been in the game for decades) are selling their properties due to rising interest rates and costs. 

Thanks to a series of regulatory changes, being a landlord isn’t what it used to be. In 2015, George Osborne reduced tax relief on buy-to-let mortgages. Then, landlords were hit by a stamp duty surcharge on additional properties. And that’s not all: Michael Gove has announced plans to scrap section 21 ‘no fault’ evictions, making it that little bit harder for landlords to get rid of tenants. 

Despite these changes, some landlords do still turn a profit. But it’s crucial that you’ve run the numbers and you know what you’re getting into before you take the leap. Even if you are able to generate returns of 4%, 5% or even 7% on your investment, consider the amount of time and energy you’ll need to spend on your portfolio. Compare this to the amount of time and energy the stock market demands of you, and property can become even less attractive. 

Investing isn’t supposed to be fun

Whether a flyer’s been pushed through your door or you’ve spotted an ad in the newspaper, think of these promises as little more than a tip off from a stranger down the pub.

These advertisers don’t know you, your lifestyle, your family situation or your goals. They don’t know how your existing investments are performing or how much progress you’ve made. They can’t possibly make a recommendation that’s right for you. It’s a far cry from a financial plan.

If your pension and stock market investments have been underperforming in recent years, I can understand why you might be getting itchy feet. Property and whisky might seem like the perfect antidote — especially if you already have an interest in these industries. Not to mention they’re much more exciting, tangible and easy to wrap your head around than stocks and bonds. 

But since when did investing have to be fun? In the long run, the most boring investments tend to be the safest and most reliable. Perhaps it’s time we separated the two.

We’ll focus on optimising your portfolio, so you can focus on optimising your life. If you love scotch and property, why not treat yourself to a weekend away and a whisky tasting experience? I feel an ad slogan coming on: ‘Sponsor a struggling landlord with a single malt in your hand today!’

Don’t worry, I’ll stick to the day job!