Stamps as an Alternative Investment

The Financial Times recently posted a good article on stamps as an alternative investment.  We have heard much about art as an asset and as an alternative investment, but few other collecting sectors have the ability or documented returns to be called an investment worthy.

The article starts off with collectors desire to have complete sets of limited production runs, such as coins or stamps.  A complete set along with production limits  typical have a positive bearing on price and value over time.

The article notes that investing in stamps can be beneficial even without collecting the rarest of issues, as sufficient quantities of good condition stamps are available to the collector.   With this in mind, as appraisers, especially generalists, we too should be aware of the value of stamps.

I once had a small collection to look at and I was unsure of its value.  I called a specialist at a leading auction house, and was told I was looking at a collection of, well, postage.

The FT reports on stamp collecting as an investment

However, those considering using stamps as an alternative investment need not go this far. Many rare stamps are available in sufficient quantity and condition to be considered for investment purposes, at a cost not far into four figures.

Condition is a crucial variable, though. Best prices are achieved for unused stamps that have the original gum intact and a complete set of undisturbed perforations. Stamps such as Penny Blacks, which had no perforations but were cut from a sheet, should have evenly cut margins. Used stamps should have a clear and lightly applied cancellation mark, rather than a heavy or smudged one. Colours should also be fresh and show no fading.

These requirements limit the number of stamps available for investment purposes, and raise their prices far beyond more humdrum examples.

When buying, timing is everything. While prices are not generally cyclical, investors’ enthusiasm for stamps does go in waves. Many would-be investors were burnt by an isolated dramatic peak in prices in the late 1970s. But, caught at the right time, stamps can show good returns.

I logged a gain in excess of 40 per cent between 2004 and 2008 on a small portfolio of Victorian stamps – even allowing for the impact of a hefty bid-offer spread (the difference between a dealer’s buying and selling price).

Source: The Financial Times