Highlight: Investing in stamps

Story by: Anthony Beachey

Financial Times (18.01.10) - The passion that collectables inspire among their devotees is perhaps best surmised by Malcolm Forbes, editor-in-chief of Forbes Magazine. He says: "None of my other investments gives me the joy that autographs do because they make me feel that I am holding a piece of history in my hands." The same sentiments undoubtedly embrace philately - stamp collecting and investing - particularly as rare stamps have also proven a sound investment historically, according to Stanley Gibbons, the leading UK stamp dealer.

Having issued catalogues detailing the price of stamps every year since 1865, Stanley Gibbons is well placed to assess how stamps have performed as a long-term investment. Its benchmark is the Stanley Gibbons GB30 index, which depicts the 30 rarest stamps and dates back to the 1950s. According to the company, this index has not declined in value during any five-year period since 1970. Between 1998 and 2008, the index rose by 245.2 per cent, with the best-performing stamp – an 1840 Twopenny Blue – increasing by 390.9 per cent, while even the worst performer more than doubled in value.

Geoff Anandappa, investment portfolio manager at Stanley Gibbons, points out that rare stamps have always shown a very good return because of their scarcity and abundant demand – "stamps have been collected for 100 years and more". It is worth noting Mr Anandappa refers to very rare stamps. Of the 2-3m stamps that can be bought at any one time, the company recommends just 100-150 to investors - stamps that must be in the best possible condition.

Yet Mr Anandappa also highlights the limited investment flowing into stamps, with most being bought by collectors – a paradox, given the historically healthy returns recorded by this esoteric area. This stems mainly from the fact few investors know about the potential returns stamps can generate.

"When I speak at investment conferences," Mr Anandappa says, "it is often the first time people have heard about investing in stamps or collectables in general. The majority of investors will know about wine or gold, but most would not even have considered stamps."

Yet interest in this area, while hitherto limited, is now growing, according to Richard Broughton, a wealth adviser at Alexander Associates Group (AAG). Mr Broughton reports that very wealthy clients – those with an income in excess of £1m a year and estates valued at more than £10m – are considering alternative investments such as stamps due to concerns about a potential increase in inflation. In addition, "many are sitting on large piles of cash" and looking for uncorrelated avenues in which to invest.

Stanley Gibbons recommends a minimum investment of £10,000, which would purchase a diversified portfolio of 4-6 stamps. It advises that stamps are not a short-term investment and should be held for at least 5-10 years.

"Most people who buy a portfolio leave it with us – we offer free storage, and the value can be checked online," he says. He adds that stamps provide a good means of diversifying an investor's assets because they bear little correlation to other investments.

The growth of the internet is another factor driving demand, according to David McMonagle, managing director of Corbitts, an auctioneer and dealer in stamps based in Newcastle. "More stamps are being sold than ever, but the market has changed dramatically, with many people buying online," he says.

The internet has attracted numerous new collectors to the hobby, as their high value and low weight, and the ease with which they can be scanned for online sharing and marketing, makes them ideal products for online dealing. Weight for weight, stamps are often described as probably the most valuable tangible asset in the world.

Growing overseas interest is a further key driver of demand and a factor set to rise in significance over the next 10-15 years, according to Mr Anandappa, who adds that around one-third of the world's collectors are based in China.

"They are only just starting to get access to the web and personal credit cards," he says. "British stamps are in huge demand, not just in China, but around the globe, because Britain was the first country to issue stamps."

The Chinese in particular cannot get enough of Penny Blacks, the first stamp in the world deployed in the public postage system, and Stanley Gibbons says demand is likely to continue to increase as living standards in emerging economies continues to rise.

Mr Broughton says stamp investing is not without drawbacks, however. These include the fact this is a small, thinly traded market, which prompts high charges (an auctioneer charges for buying and selling). "It is not like investing in a unit trust," he says. "You can't just buy and sell these portfolios overnight. Indeed, you could be stuck with an investment for years. So it is an area that is only of interest to a very small proportion of investors, those who don't need any liquidity over the next 5-10 years."

Colin Such, director of Warwick & Warwick, one of the leading auctioneers and valuers of collectables in the UK, also warns that while stamps are potentially a good investment, they can also present huge pitfalls for the unwary.

"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," he says. "When you buy on a retail basis, you have to overcome the profit margins the dealer has built into his selling price, plus VAT. When you sell, you also have to overcome dealing charges, whether you sell to an auction house or a dealer. That would consume an awful lot of value. To overcome that mark-up and sell at a profit would require quite a few years of appreciation."

Anthony Beachey is a freelance journalist

(Quelle: http://www.ftadviser.com/InvestmentAdviser/Investments/AssetClass/AlternativeInvestments/Features/article/20100118/308fc0ce-fea4-11de-a148-00144f2af8e8/Highlight-Investing-in-stamps.jsp)