Drink your way to a good fortune. A guide to the science, commerce and emotions that run in whisky investing

Way back in the 12th century, when monarchs and armoured knights were still crossing swords over titles and honour in medieval Europe, an unnamed distiller accidentally left a concoction of malted barley in the dampness of his basement. Years passed before the man revisited the underground cabin, but when he finally did make his way through the door, it was to discover a sweet golden-hued liquid that delivered a veritable punch when consumed. Aqua vitae, the distiller decided to call it, which roughly translates to "water of life" in English.

Now, this is just one of the many theories surrounding a question that remains hidden under the sands of time. Truth be told - nobody really knows much about the origin of whisky, or why it was dubbed aqua vitae when the first written record of the liquor pertains to an Irish chieftain drinking himself to an ironic death on the Christmas of 1405. Today, whisky has become a joy for connoisseurs and an investment option that's rapidly gaining ground. And even the most rabid alcohol-hater would agree that the very thought of a simple grain of barley turning into a precious spirit upon being condensed, fermented, malted and aged seems tinged with the most divine of magic.

The 'single malt' is called so because it is the product of just one distillery, and unlike blended whisky - which is mixed with mass-produced grain whiskies - it is in a pure form. One can gauge the worth of a single malt through its rise in demand, which effectively amps up the price. The first quarter of 2013 witnessed a sale of 3,789 bottles from the Highland area, a 34.5 per cent increase over 2012's sale of 2,818 bottles. And this is an ongoing trend. While sales stood at 8,696 in 2011, it rose by 62.7 per cent in 2012 to a whopping 14,150. Sales of the top 1,000 most exclusive whiskies increased by 23.27 per cent last year, a phenomenon that suggests an overall growth of 123 per cent in the last five years. Malts are aged in limited batches for a minimum of three years, and distilleries in the famed regions of Speyside, Highland and Islay manage a little over 100.

The Whisky Highland Index, which provides a detailed distillery investment picture for collectors and investors, suggests that the top 250 whiskies cost Pound 48,125 in 2008. This went up to Pound 134,740 by 2011 - an increase of 179.79 per cent. In 2008, the top 100 were priced at Pound 25,030, and in 2011, this figure shot up by 244.75 per cent and touched Pound 86,280. The top 10 whiskies, on the other hand, stood at Pound 6,500 and hit Pound 32,600 by 2011, an increase of 401.54 per cent.

The same index also compares gold with whisky. In recent years, the value of the precious metal has risen 146 per cent over the same period, and diamonds by just 10 per cent. And, compared to the gains accrued by some other stocks and commodities, whisky returns seem more attractive. Not to mention how darn good it tastes. Andy Simpson, founder of Whisky Highland, feels, "Some of the rare and limited bottlings from top performing distilleries like Dalmore and Macallan are achieving eye-watering returns at auctions, outperforming most other forms of alternative assets… It won't be long before whisky is viewed in the same light as art, wine or classic cars."

Whisky investment is slightly more complicated than going to a liquor shop and picking up anything that catches your fancy. The infallible modus operandi is to chase limited edition releases from prized labels like Glenlivet, Macallan, Balvenie and Dalmore, or surviving bottles from distilleries no longer in operation such as Rosebank and Mortlach.

David Robertson, Rare Whisky Director at Whyte & Mackay, says, "The demand for rare and limited-edition whiskies is exceptional, and it's a trend that is set to continue in line with the uplift in other luxury goods markets. We are going to see more distilleries and brands release very special whiskies designed to meet the growing demand from luxury consumers."

Since buyers make investments at the start of a long-drawn ageing process, they need to keep the spirit alive in its literal entirety. Sandeep Arora, the director of Spiritual Luxury Living, has invested in a Bruichladdich cask. "The appreciation in casks will be much higher than bottles in the future," he says.

Buying a cask lets you sample the spirit as it matures, and you can check whether its peaty notes match your taste before deciding to bottle it.

For skeptics, there are two reassuring details. First, the entry price point can range anywhere between Pound 50 per bottle to Pound 100,000 per bottle; second, it has a longer shelf life, and is much easier to store than vintage wine. And even if the whisky fails to get you the returns you desire, it will make that tulip-shaped glass acquire a crimson glow, giving you a taste of the good life. In for a peg, in for a pint.