Investing in rare stamps requires a high degree of expertise and can be very risky for the novice. Unless you know what you are doing – and this only comes with many years of experience – it is very difficult to buy sensibly and at the right prices.
Rare stamps are among the most portable of tangible investments, take up little space but require careful storage as condition is one of the most important factors in determining the value of a stamp. Other tangible investments include art, antiques, precious metals, rare coins and many others that are all termed alternative investments. Interest in stamps as an investment tends to increase when traditional investments are not doing well, causing investors to seek alternatives. The increasing age of the population in western countries has also been credited with a resurgence in interest in stamps.
Are stamps a still a good investment today?
There’s been a dramatic divergence of fates in the world of stamp collecting when it comes to investment values. Billionaires still trophy hunt ultra-rare specimens, but most stamps have seen their values collapse due to dwindling demand. The price of collectibles is, at its essence, a supply and demand game after all.
The rarest of rare stamps still serve as reliable and sometimes lucrative places to park money. Meanwhile, many stamps have depreciated so quickly they are worth a tenth the price listed in purportedly contemporary guidebooks.
Postage stamps as a good investment, may well be true for very old rare stamps but certainly not in most cases. When it comes to less rare stamps we should treat Stanley Gibbons’ catalog values with a large pinch of salt, as in many cases they appear to be absurdly high. Unless you are wealthy enough to invest in ultra-rare stamps, it’s probable that the time for stamp collections as a personal investment has passed. Those who continue to buy stamps in the middle to lower tier of value should do it solely for the love of these historical objects and their stories, and not with the hope of future financial return.
The stamp market has been in decline, price wise, since the Internet became the principal vehicle for stamp buying precisely because it has greatly improved price transparency and broadened competition. Anyone can become a stamp dealer today with little more than a computer and grandpa’s collection. But this is only the beginning of the changes brought by the Internet. Changes which will take decades to fully play out.
Demographics also play a part since about four collectors are dying for every new one. Today this creates an excess supply problem which also drives down prices. But do these factors affect the market in a uniform way?
5 stamps that could be a good investment?
According to some, there are a few stamps that may be a good investment for the future. Mainly because finding ones in good condition is rare, they are quite scarce themselves and they are not quite expensive compared to others.
1. Penny Black - 1840
2. German Inflation Stamps - 1923
3. Italian Old States Stamps - Pre 19th Century
4. Stamps from the Chinese Cultural Revolution - 1966 – 1976
5. Dutch King Willem III - 1872
Let's do some math
According to Forbes:
Over 40% of stamps in the market sell for less than $1 and about another 20% below $5. This is the bulk of the stamp universe and what is in the hands of collectors.
The stamps that I qualify as investment grade were issued before 1950 and are priced at $25 and above. Their quantities are very small compared to stamps issued since 1950, but they probably represent 80% of the total value of stamps in the market place. 1950 is used as a cutoff since it marks a point in time when stamp usage began to decline while postal authorities worldwide cranked up new stamp issuance to exploit the hobby. This resulted in new stamps being issued in such large quantities that few will ever appreciate in value.
In short, the stamp industry is a bifurcated market where the vast majority of the participants are hobbyists coping with a bloated inventory and an excess of new issuance versus a smaller, wealthier group of investment oriented collectors with a shrinking inventory and growing participation.
Looking at appreciation potential for stamps, we see that the hobbyist collectors are in a market where there are close to a million different postage stamps most of which were issued in excessive quantities and face a declining base of participants. In contrast, the investor group face a static population of about 50,000 different stamps, issued in much more limited quantities. Quantities that are constantly declining due to decades of poor storage, mishandling and loss.
So, stamps does not seems to be as a good investment after all, although according to Stanley Gibbons (of course) "Prices are rising because more collectors are chasing fewer and fewer newly discovered unused old stamps. There is also a rising demand for Hong Kong and Chinese stamps, which have done very well over the past five years. The Chinese are keen collectors in their country’s stamps, having been banned from doing so by Chairman Mao, who saw the hobby as too decadent."
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