Thoughts About British Stamps and Covers as an Investment
A collector may have one eye on the long term and enjoy the added benefit of building up a collection of interest and something of value to pass on to future generations or perhaps sell later in life. That contrasts with pure philatelic investment in buying stamps today with an expectation that their value will increase over time at a faster rate than inflation depreciates it. Investors in stamps also want to see them perform better than some other investment options. When investing in, rather than collecting, stamps or covers there is little room for sentiment and any research undertaken is likely to be focused on rarity, demand, price and condition purely to help reach businesslike decisions.
As with most forms of investment there is always a degree of risk attached. While you can have the certainty of paying a given price for stamps today, there are no guarantees about the future values which can be realised for those same stamps or how inflation will impact on the real return you actually achieve in future. You will be buying tangible items that will need to be sold to realise the return on your investment. This process can take time and involve costs and this usually means an investment in stamps is not often right for a short term play.
While a good investment advisor will usually warn people that the past is no guarantee of future performance, historical performance is often the only guide we have to help us weigh up many of the potential risks before we part with our cash. However it is true that, over time, quality stamps and covers have often proved good investments over many generations.
So let me guide you through my own thoughts whenever I consider buying items to tuck away for a few years. The three most important factors I research and consider before buying stamps or covers as an investment are:
1) Current scarcity and the projected supply and demand prospects.
2) The current price I have to pay to acquire the stamp or cover. Is it fair? Is it cheap? Is it too optimistic?
3) The condition of the item. Put simply, the better the condition then the more confidence I will have in the item. The times when rarity cancels out condition faults are much rarer than many collectors realise.
Speaking for myself I rarely go "looking" for stamps to buy as an investment. In this day and age I get enough brochures through my letterbox and see numerous online auctions most days that grab my attention as possible investment opportunities. So I tend to look at items as they present themselves and start a process of playing "devils advocate" in my mind as to why this item wouldn't prove a successful investment.
The thought process typically follows the previously mentioned three factors. If I determine an item is competitively priced given its condition and scarcity then the judgement about future demand is often the trickiest question to resolve. Fashions can change values based on popularity and demand in all kinds of markets so I try to play safe and conservative. To this end, if I'm contemplating a fairly high level of investment involving hundreds of pounds or more, I usually either concentrate on classic stamps and covers that have displayed a consistent popularity over time that I think are underpriced today or, less frequently, I bid for very scarce specialist items such as major errors.
However lately, and on a completely different "investment" level, I've also done quite nicely by buying some stamp booklets in modest volumes when issued at their face value and putting them away for a year or so. In most cases I've managed to predict the booklets that will prove popular and rise somewhat in value fairly quickly. This type of investment actually carries a much reduced risk for me because all the booklets have contained 1st class NVI stamps (no value indicator). This effectively meant their "face value" increased not long after I bought them when postal rates increased and resale, even at face value, would return my outlay and even cover some costs.
I therefore only had to see a fairly modest rise in value over and above face value to achieve a reasonable and pretty quick profit and the downside risk was minimal. With sites like eBay available to sell the booklets individually I remain bullish about such projects on a relatively small scale. I have averaged a spend in the region of between £50 and £100 per month and currently show a 22% annualised return on these purchases. Put another way that's an £11 annual return on £50 being made regularly. That may not seem much but compare that to putting £50 untouched in a bank or building society account for 12 months lately!
The 22% return I've averaged takes the lack of profits in to account from the booklets that didn't perform as well as hoped when I bought them. In these instances they have largely been used instead to cover my ongoing mailing costs meaning, as I paid for them a year or so earlier, I have still made a little unaccounted for return on their value simply due to postal rate increases although I should acknowledge this is tempered in reality because I can otherwise buy UK postage cheaper than face value.
I have to admit this kind of "regular saving" strategy would probably have been unworkable and unsustainable before the introduction of the NVI postage stamps.
Hopefully this article will have sparked some ideas or thoughts in your mind. I have to admit I've walked away from making what would have been many a winning philatelic investment in my time and will undoubtedly do so again. But if the winners were that easy to predict then we would all be rich and retired by now! I never suggest anyone should look at stamps and covers as their only form of investment vehicle but I'm sure it can add another dimension and help spread risks for many savers. If, like me, you also get some genuine pleasure from owning, holding and studying the items you buy then that's a terrific added bonus!
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