How to invest in rare stamps
Where now children have iPads and Xboxes, once they collected stamps. Richard Ashton, who now consults on postage stamps for veteran auction house Sotheby’s, remembers those days well.
The tiny scraps of paper he spent rainy afternoons cataloguing and collecting are now the world’s most valuable commodity by weight and, following the financial crisis, an increasingly attractive play for investors seeking diversification.
Keith Heddle, managing director of rare stamp broker Stanley Gibbons, says: “There used to be a sense that stamps were light curiosities, but there has been real shift in the world since 2008 and 2009. They’re never going to be for everybody, but they do have a place.”
Ashton believes that stamps, despite their high value, can still make money for investors and collectors from here. The current generation of people who collected stamps as children are now turning to the hobby in their retirement, he says, and as economies in the Middle East, Africa, Asia and South America pick up, so too does the allure of stamp collecting.
As Heddle explains: “There is no stigma to collecting stamps in emerging markets, and there’s also a drive to reclaim their heritage. It’s almost a reverse imperialism; now that they have the wealth they’ll have a Bentley and a Penny Black, thanks very much.”
In fact, the very fact that the stamp market is driven primarily by collectors as opposed to investors makes it more stable than some other asset classes.
Ashton explains: “Prices don’t behave like shares, where if nobody wants to buy at that particular moment, you’re stuffed. The best quality stamps will always be in demand.”
The anchor of a portfolio
How stable is the asset class? According to Heddle, stamps are an alternative investment with “massively low” volatility. While the Dow Jones and FTSE 100 tanked during the financial downturn, stamps – along with coins and UK property – kept on climbing.
The Stanley Gibbons GB 250 – which tracks the value of the 250 most valuable investment-grade British stamps over ten years – shows that the indexed items have seen an average increase in value of 244.76 per cent since 2002 and an average annual increase of 3.4 per cent.
Heddle says: “There’s no bling factor – this isn’t fine wine. You don’t get speculators or unsophisticated investors trying to play the market.”
The same market dynamics that make stamps stable also make them illiquid, Heddle warns. A stamp portfolio is a long-term play, ideally with a time horizon of five years or more, and your allocation should be a small percentage of your overall portfolio – three per cent of a £7m portfolio, for example.
Attempting to start a portfolio by yourself is a risky proposition, as well, for one very important reason: in this market, quality is everything.
Quality is king
When it comes to recognising what qualifies as an investment grade stamp, its bet to seek advice. A broker like Stanley Gibbons has teams of experts to examine and value stamps, while Ashton recommends asking an auctioneer if you find something you fancy at an auction. “They’ll be fair,” he says.
Experts grade the quality of a stamp on a scale from a perfect “mint” all the way down to “fair” or “poor”. A complex set of factors determine each stamp’s rating, from the ‘gum’ – the stamp’s adhesive backing – to any cancellations that appear, how the stamp is mounted and how intact the stamp itself may be. The rarity of the stamp is also important.
Ashton says: “The crucial thing is to buy stamps that are in the very best condition. Many of the rarest stamps will have small defects, but that’s because of their age. When you go down a notch the difference in price between superb and small faults is dramatic. A superb quality stamp will always be in demand, whereas one with a defect will not be.”
There are lots of different ways to begin collecting stamps, but when it comes to investing for the future it’s best to start with an expert. After all, you don’t want to leave your children a portfolio full of duds.
Heddle says: “You can do this yourself, but it takes time and money. For those short on both, go to a specialist.”
A specialist will also make sure that your stamps are stored correctly. Heat, light and damp can wreak havoc on rare stamps, and storing them outside of your home means you don’t have to insure them.
Investors may not start as stamp lovers, but Heddle and Ashton both warn that passions can be ignited. Aston says: “The best combination is someone who starts off wanting to invest in stamps but very quickly becomes a collector. They have a passion that develops.”
But remember, he says, the single most important criteria – always buy superb quality.
The world’s most vauable stamps
|1856 British Guiana 1c Black on magenta||Set a world record recently, selling for $9,480,000.|
|1855 Swedish Treskilling Yellow
||Sold in 2010 to a buyer who chose not to disclose how much was paid. The price is believed to be in excess of the $2.3m it achieved when last sold in 1996 as auctioneers announced to the BBC that a new record had been set.
‘Post Office’ Mauritius 2d Blue
|Sold by Spink at auction on 28th June 2011. This stamp holds the record for the most expensive stamp sold in the UK (sold for £1,053,090 inc premiums). Around 26 examples of the Post Office Mauritius are known to exist (14 x 1d. red, 12 x 2d. blue.)|
|The Bordeaux Letter||Bearing single examples of both the 1d red and 2d blue ‘Post Office’ Mauritius stamps. Sold for 5,750,000 Swiss francs in 1993.|
|1868 USA Z-Grill||Having purchased a block of inverted Jenny stamps for $2.97m ‘Bond King’, Bill Gross famously swapped them for a single example of the ‘1868 one cent Z-Grill’ in 2005 in order to complete his collection of 19th Century US stamps. There are only two examples of the Z Grill known to exist, making it America’s rarest stamp.|
Source: Stanley Gibbons