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Investing in Rare Postage Stamps

A guide to investing in rare postage stamps - and how you can beat stocks with a stamp investment

Investment-grade stamps - those rarest, most valuable examples - have put the stock markets to shame in the past decade, posting double digit annual returns.

And the world's sharpest investment minds are taking note.

Business moguls Warren Buffet and Bill Gross are both major investors in the sector. Gross recently sold part of his Great Britain postage stamp collection for $10.5m - up 22.75% pa on his original $2.5m purchase price seven years earlier.

Reasons to invest

Historical returns: Stamps have been a respected asset with investors for decades and have continued to perform well during the recession, much better than the stock markets. As tangible assets they excel during times of high inflation.

Liquidity: There are an estimated 50m serious stamp collectors globally, and the finest rare stamps are always in demand. Rare stamps have worldwide recognition and global tradability.

Low volatility: Prices are underpinned by the sector's large and passionate collector base - collectible stamps are a $10bn pa global market. In addition, hundreds of books and price guides exist. This extensive data increases the level of comfort for investors. There are no nasty surprises.

Limited supply: With only a finite supply of investment-grade stamps available, prices can only rise as demand increases.

Growing demand:

o   Baby boomers now own 80% of the world's wealth: As they enter retirement, baby boomers will return to hobbies of their youth and spend their disposable wealth on investments such as rare stamps.

o   By 2030 some 2bn extra people will be in the middle-class bracket, Goldman Sachs predicts: This demographic produces the majority of investment-grade stamp collectors.

o   China, the world's booming second-largest economy, is a nation of stamp collectors: There are an estimated 18m enthusiasts. This figure will rise sharply as both its population and prosperity continues to grow.

o   The growing economies of Brazil, Russia and India will also boost demand: India already has 2m stamp collectors. Its rapidly expanding middle class can only increase this figure.

o   Stamp collecting is an increasingly "aspirational" investment, with leading collectors fighting over the best pieces.

Historical performance

Penny Black
$556,045 in 2011: The world's most valuable Penny Black ever auctioned

The 30 rarest stamps from Great Britain have brought an average return of 13.2% CAGR since 2002, according to the GB30 Rarities Index. In 2013, it realised an increase of 4.4%, demonstrating the buoyancy of the market, with the average annual increase standing at 3.4%.

What was described as the "finest and most attractive Penny Black cover in existence" sold for £348,000 ($556,045) in 2011, a world record for a Penny Black.

Tracking the top 200 investment grade Chinese stamps, the China 200 Rare Stamp Index has posted an impressive compound annual growth rate of 11.6% over the past 23 years, with the value of the index rising by over £4m ($6.5m).

A mint condition 1968 The Whole Country is Red set a new $1.15m record for a single Chinese stamp at auction in May 2012.

The record for any stamp sold at auction was set in June 2014 at $9.5m by the legendary British Guiana 1c Magenta. This has broughy a huge surge in interest to the stamp collecting market and auctions since have seen very encouraging results.

Bill Gross bought a plate block of four Inverted Jenny airmail stamps for $2.97m in 2006 - the highest price ever paid for a US stamp item. It had last sold for $1.1m in 1989 - a 6% pa rise.

Thinking of investing in stamps? Click here to get started.

Or get in touch on:

+44 (0) 117 933 9503

info@paulfrasercollectibles.com

View our stamps stock here.



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Last updated: 24 April 2014