It might sound a bit odd to want to find out how to invest in stamps…to make money.
Collecting stamps is one thing – maybe your dad was a fan and kept trying to get you interested in these colourful bits of paper. But why invest in them?
You might be thinking, how valuable can one stamp be?
Well, very valuable is the answer – last year a British Guiana One-Cent Magenta stamp sold for $9.48 million.
If you’re looking to invest in something different, stamps are considered by many to be a reliable investment. Here’s a step by step guide on how to invest in stamps.
- Why invest in stamps?
- A word of warning
- What determines a stamp’s worth?
- How to invest in stamps
- Storing your collection
- Don’t overlook insurance
- When can I look to sell my stamps and get my money?
Stamps might not sound like a great investment, in fact many people at first confuse investing in stamps with stamp collection.
However, those who collect stamps are interested in philately (the study of stamps and postal history).
Collectors are not particularly interested in the monetary value of stamps, but are in it for the joy of collecting.
For investors, only a tiny percentage of stamps are valuable enough for them to consider investing in.
But, even so, why can investing in stamps pay dividends?
- They are largely unrelated to other investments. A lot of investments are related to the state of economy so if the economy is struggling, shares and property, for example, might lose their value. Stamps are largely unaffected by the economy, however, and are instead dependent upon the demand from stamp buyers. This means stamps can retain their value even when other investments begin to struggle.
- Investment grade stamps have consistently grown in value. Prices have risen steadily over the past 10 years, rising by 133.5 per cent in the past decade — a compound annual growth rate of 8.8% — according to Stanley Gibbons investment GB250 Index, which tracks the performance of the top 250 investment-grade British stamps. What’s more, during the financial crash of 2008 – 2010, the value of stamps actually increased by 17.7%.
- You’re investing in a piece of history. Each valuable stamp can tell its own story and is of historic significance. Many investors find satisfaction in investing in a tangible and significant item as opposed to a share.
- You’ll be paying capital gains on the profit you make, not income tax. Whereas income tax has a top rate of 45%, capital gains tax has a top rate of 28%.
You should be aware, however, that stamp investments are not covered by the Financial Conduct Authority so you’re not covered if you lose money on your investment, as is the case with quite a few different types of investments, particularly in collectables.
Stamp investing is also not recommended as something that should be a big part of your investment portfolio. Stanley Gibbons, a company that specialises in everything to do with postage stamps, recommend it should be no-more than 10% of your portfolio.
This is a key point when it comes to finding out how to invest in stamps to make sensible money.
The simple answer is “however much collectors are willing to pay for it”.
Bearing that in mind, of course, you should only invest in stamps which have a healthy number of collectors desiring them and, you believe, will continue to want them in the future.
The three things collectors will be interested in our:
- How rare is the stamp? As you’d expect, on the whole, the rarer the stamp, the more it’s worth.
- Condition. If you’re looking to make a profit with any form of collectible, the condition is going to play a vital role. Stamps are “graded” to describe condition and value and can range from “superb”, where the stamp is considered perfect in all respects and the finest quality, to “poor”, where the stamp itself may be torn or damaged or the design is off-centre. To gauge the condition of the stamp you are considering, check out for colour fading, the edging and the state of the gum on the back of the stamp.
- Authenticity. You need to be able to prove your stamp is authentic, so make sure you get a certificate from a trusted organisation or seller when buying your stamps.
A good example of a stamp to look our for is the Penny Black. They’re well regarded and likely to be a good investment but they’re not actually rare and can be bought for as little as £10.
As always when investing, look to buy low so you’ll eventually be able to sell on at a profit.
There are two ways to invest in stamps.
BUY A PORTFOLIO
You can now buy a single portfolio of stamps, much as you would buy a single investment fund holding a collection of stamps. These are available from companies such as Stanley Gibbons, which offers various “capital protected” investment plans.
They allow you to buy a portfolio of stamps of five and seven rare stamps, which can be kept at home or stored and insured at the firm’s secured fault in London, Guernsey or Hong Kong. The minimum price for investing is £10,000 for a period of five to 10 years. When the term is up and the stamps have not risen in value compared to those listed in the Gibbons catalogue, the company will refund your money. However, if there is any growth when you come to sell, it will take 20% of the profit.
Bear in mind that like other “alternative assets”, this type of investment is an unregulated area, which means that your money is not protected by an ombudsman or compensation scheme, nor is the company’s marketing literature regulated. Like all investments, this type of “capital protected” investment plan can go up as well as down – so only take money that you can afford to lose.
Buy stamps DIRECTLY
The second way is the old fashioned way – you go and buy stamps yourself and then later sell them on for a profit either through a broker or privately. If this is what you plan to do, your first port of call should be Ukphilately.org.uk for their advice.
This site, which is sponsored by the National Philatelic Society, tells you everything you need to know about buying and selling stamps.
Stamp auctions are a great way for philatelic traders and stamp collectors to buy and sell stamps. Making bids online has the advantage of reaching a wider range of stamps on offer as you can bid on auctions across the country from the comfort of your own home. What’s more, you are less likely to get caught up in the atmosphere of the auction and find yourself over bidding and blowing your budget.
Another route to amassing a stamp collection is to attend a specialist fair where you will find a large number of dealers under one roof. Listings of fairs and their organisers appear in the main monthly stamp magazines and can be found online at the UK Philately site. Some stamp fairs are organised by local Philatelic Societies, and include not only dealers, but displays and competitions as well. One of the biggest fairs is Stampex, which is held every spring and autumn in London.
Remember, if you’re storing the stamps yourself it’s up to you to keep them in the best possible condition. Any damage can be devastating to a stamp’s value, if not destroy it completely. Knowing how to invest in stamps definitely includes knowing how to preserve them!
- Keep your collection grease, dirt and grime free and resist the urge to touch the stamps with your hands. Always use stamp tongs, rather than sharp tweezers. Before you set out to move your more valuable stamps with tongs, practice your skills on easily replaceable issues to avoid tearing through misuse.
- Ensure that you store your collection safely. Avoid areas in your home that are humid as this can warping, mould and mildew growth, and other conditions that can have a serious impact on the value of your collection. High humidity can also damage the gum causing a huge reduction in value.
- Do not store your collection in a loft, garage or basement as temperature changes can cause certain materials to expand or contract, accelerating deterioration. Also store your stamps more than 6” off the floor at all times in case of flooding.
- Bear in mind that pests such as mice, insects and microorganisms are attracted to organic material such as paper – and they can cause catastrophic damage to your prized collection. Keep your stamps safe from this destruction and never store your collection in cardboard or other paper containers. Don’t use of aerosol pest control products in the area if possible, as they too can damage your stamps through chemical exposure.
No matter how careful you are about caring for stamp collection, accidents can – and do – happen. According to Hiscox insurance, less than 5% of stamp collections are insured. Ensure that you are covered should the worst happen and get the right cover.
Before you approach an insurer, it is vital to get your collection valued. A stamp dealer may be your first port of call, or you could also approach your local auction house; prices for identification and valuation services range from around £150 with local auction houses to over £1,000 for a day-long home visit by a major auctioneer.
As a collector, it is also worth bearing in mind that some collections can reach a high value very quickly – which can soon take you over the limit on your standard home contents insurance limit.
While most home contents insurance policies will provide an element of cover, most will have a limit that will be paid out on damage to collectable items. Be sure to speak to your insurer before taking out a policy, often it can be amended to cover a high-value collection.
Another key element of learning how to invest in stamps is learning when to sell and who to sell to.
Stamps are not a highly volatile market and so tend not to go up or down in price at any great speed. It is for this reason you shouldn’t be investing in stamps if you’re going to need your money within a couple of years.
Stanley Gibbons recommend your investment should be at least five years but that ten years would be the ideal minimum.
When you come to sell your collection – or individual stamps – speak to a specialist to get it valued and then work out the best way to sell it.
Relatively low value stamps can be sold at stamp fairs, stamp shops, shows and exhibitions and also online. If it’s a stamp with astonishing value, it may even be best to sell it through one of the big auction houses such as Christies or Sotheby’s.
Is investing in stamps something that interests you?
Let us know in the comments section below.