Investing in whisky, like all forms of investing, involves risk. To assess the risks, you should ask yourself what kind of investor you are. You can then always refer back to that with the investments you make. There are three general types of investment.
1. Defensive investment
Defensive investing is investing with as little risk as possible. It's focused on healthy yield in the long term, paired with minimal risk of loss in the short term. A well-diversified investment portfolio is an important part of defensive investing. A defensive investor always prioritises stability over high yields. A defensive strategy focuses on capital preservation, with the possibility of slight profit. Because you do not expect high yields, there is no need to run a high risk.
2. Offensive investment
Offensive investing is about maximising yields, which requires a bit more risk. An offensive investor is not afraid of risk, so they can achieve much higher yields than a defensive or neutral investor. At the same time, of course, their losses can also be greater.
When investing offensively, you always have to take short-term losses into account, which is why it is important to have a long investment horizon, so short-term losses can be compensated by years of gains. That means offensive investing is not a good choice for the short term.
3. Neutral investment
A neutral strategy is somewhere between defensive and offensive. You run less risk than an offensive investor, but that means you will also potentially generate lower yields. However, compared to a defensive investor, a neutral investor achieves higher potential yields. In return, of course, they take on a little more risk. So risk and return go hand in hand.
A neutral investor has a longer investment horizon, so possible loss-making years are compensated by profitable years. A neutral strategy involves some risk to achieve a considerable yield. The goal of this strategy is to grow assets with a well-considered average risk.