Collecting early examples of postage stamps is one of the world’s best kept investment secrets. The prices of investment-grade stamps have grown consistently over the last century even through two world wars and two stock market crashes. Over the past 5 years, as financial & stock markets tumbled, the Stamp Rarities Index grew by 84.3%. This blog follows the collecting of stamps that can offer the opportunity to achieve wealth diversification and profit potential.
Look out for penny blacks and penny reds with pinholes in them. An article which appeared in "THE LADY" magazine in the 1840's suggested a way to entertain your children by getting them to make a "STAMP SNAKE". You did this by cutting stamps off envelopes and old letters and threading them through with cotton, the red stamps making the body of the snake (GB PENNY RED STAMPS) and the black ones (PENNY BLACKS) making the head. Your children could then run round the drawing-room with their stamp snakes. You can still find lovely-looking copies of the Penny Black to this day which have pinholes right through the centre. Are they worthless? You decide if these affordable stamps are still collectable and should become a seperate catogory of your early British stamp collection.
The value of the stamp itself is sometimes far surpassed by the rarity of the cancel or postmark on it. This example reached the auction price of £22 recently demonstrating that looking closer at your collection could produce dividends. Listing on Ebay
There are reputed to be 30m stamp collectors, or philatelists, worldwide. Numismatists, or coin collections are fewer in number, but growing. So with a collector base like this, there is depth and liquidity to the market and, for these reasons, many now see it as an interesting investment alternative.
As with other forms of tangible asset investment, though, there are traps that they unwary could fall into. The stamp market in particular, dominated by Stanley Gibbons, is known for big spreads between bid (selling) and offer (buying) prices. If the spread is, say, 10 per cent, your investment would therefore have to increase by this amount before you made a profit.
Consequently, other dealers grumble about the stranglehold Gibbons has on the market. Arguably, this militates against short-term gain. However, as with coins, over a longer time span – and discounting bubble conditions that have appeared from items to time – returns can be in low-double-figure percentages.
Like other collectibles, specialising in an area you know about, and buying a relatively small number of items in tip-top condition, is the best route. While no guarantees are offered, in cost cases, if you buy an investment-grade item from a dealer and then change your mind, it be generally be sold back at cost.
With stamps, the areas to avoid are those issuing has been profligate level. For example, while they are interesting to some, modern first-day coves have little value to investors. Stamps from the Edwardian and Victorian era are generally the only game in town.
As with coins, the rarest items are often errors and proofs. Genuine rarities, where there are few known examples in existence, can fetch prices in five or even six figures. Philatelists go into a state of rapture over 'multiples' and examples of stamps from the edge or corner of a sheet.
So, unless you are a real expert, navigating markets like this can be something of a problem. That's why Stanley Gibbons and some other dealers are happy to put together portfolios for would-be investors – and this can be a good first step.
As you become more interested in the subject, you may then strike out on your own. But be careful. Some dealers regard buying stamps for investment as vulgar.
An interesting twist on the investment theme is the guaranteed minimum-return contracts offered by Stanley Gibbons. These specify a level of investment and give a fixed minimum return, calculated on the basis of simple, rather than compound, interest. The contracts are backed by a dedicated portfolio of stamps.
Invest £10,000 for 10 years and you guaranteed to receive £16,000 at the end of the term.
If the stamps are worth more than this, you can either keep them, or sell them commission-free through a Gibbons auction, or sell them back at 75 per cent of catalogue value. Contracts for shorter periods offer lower returns. A five-year contract will return 125 per cent of the amount invested at the end of the period, for example. The stamps are stored by Gibbons free of charge. For more on investing in stamps, see Stamps lick the competition
