Investing in Stamps

Investing in Stamps

Created:14 May 2008 Updated:7 August 2008 Written by: Peter Temple

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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.

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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