Collecting stamps remains an extremely popular hobby with estimates suggesting there are over 60 million philatelists worldwide. However, while most people collect stamps purely for enjoyment rather than monetary gain, buying rare stamps can also be a sound investment option for more daring investors looking to diversify their portfolios beyond a mix of stocks, bonds and property.
Why invest in stamps?
Stamp investing basically involves the acquisition of a tangible asset whose value is expected to rise over time. And, as the price of stamps is dependent upon buyer demand rather than the state of the economy, it not only offers the prospect of a solid return on investment but also relatively low correlation to other conventional asset categories.
Rare stamps
Iconic stamps, like the Penny Black, remain much sought-after and can sell for thousands of pounds in pristine condition. However, a significant minority of the 68 million Penny Blacks originally produced are still in existence and that does have an impact on the value of the stamp today.
Some ultra-rare stamps, though, are truly one of a kind and can sell for vast sums of money. The world’s most expensive stamp – the sole surviving copy of the British Guiana 1c Magenta – for instance, was bought by footwear magnate Stuart Weitzman in June 2014 for a staggering $9.48 million.
While no long-term indices exist to provide an objective guide to the past performance of stamps as an investment, figures compiled by Knight Frank for their Luxury Investment Index do suggest the price of investment-grade stamps has risen consistently over time. Data from the latest index, for instance, shows a 5% annual average compound rate of return over the last decade.
Determining a stamp’s value
Each rare stamp is essentially a piece of history, and many investors derive huge satisfaction from simply owning an item of such historical significance. There are, however, a number of specific elements that determine a stamp’s worth. Rarity is one factor, with collectors prepared to pay a premium for stamps that few others possess, whether that be single surviving copies or rare imperfect prints containing ‘mistakes’.
As with all collectibles, condition is also critical, with colour fading, the edging and the state of the gum on the back of a stamp all important aspects to consider. Stamps are graded according to their condition and value, with top grade specimens considered perfect in all respects classed as ‘superb’. Another key consideration is proof that a stamp is genuine, which means it is important for investors to obtain a certificate of authenticity.
Storage matters
While stamps are certainly among the most portable of tangible investments and take up little space, they do require careful storage given that condition is such a fundamental component of their worth. Any damage can have a devastating impact on value and so, if you are not comfortable keeping a collection yourself, it is always advisable to ask a specialist firm to look after the stamps for you.
Another consideration for stamp investors is insurance needs. No matter how careful you are, accidents can and do happen, and it’s therefore important to ensure a collection is insured for its full value.
How to invest in stamps
Knowledgeable investors can purchase stamps directly from a variety of places including stamp fairs, philatelic exhibitions and auctions. For those without expertise in this area, specialist companies such as Stanley Gibbons, can provide assistance and expert knowledge for clients wishing to purchase rare stamps.
According to the National Philatelic Society, thematic collections based on specific interests, such as royalty, sports or animals, are likely to offer greater value to investors than buying single stamps.
A word of warning
Stamps have typically been viewed as a relatively reliable investment for anyone looking to invest in something a bit different. However, as with most alternative types of investment, there are risks, not least the fact this is an unregulated market with stamp investments not covered by an ombudsman or compensation scheme.
Additionally, the fact that stamp values depend entirely on buyer demand means prices can and do fall, as well as rise. For example, the world’s most expensive stamp (the British Guiana 1c Magenta mentioned earlier) was sold at auction on 8 June 2021 for $8.3 million, more than a million dollars less than previously paid. Anyone looking to diversify into this area, should therefore ensure stamp investments only ever constitute a relatively small part of their overall portfolio.