How To... Get the best out of investing in rare stamps

Buying stamps can be an exhilarating experience - when done right. Here's what you need to know:

Heading down to Stanley Gibbons and picking up a mixed bag of unsorted stamps, known as kiloware in the business, is a fun experience for any stamp collector. But while the stamps may be interesting and possibly even quite exotic, the chances of them being rare, and therefore profitable, are highly unlikely.

Novice stamp collectors have to make a more concentrated effort if they are to turn a hobby into a potentially life-changing investment.

Keep the following in mind when investing in stamps and you won't go far wrong.

Rarity

Rarity is key to a stamp's investment potential. Although the Penny Black is the world's first postage stamp, it is not especially rare. 286,700 sheets containing 68,808,000 stamps were produced and many have survived to this day. Admittedly, good examples can fetch thousands of pounds but this is small beer when compared with the rarest of stamps. The Swedish Treskilling Yellow was printed yellow in error instead of the usual green. There is only one specimen in existence, which accounts for its estimated $2.3m price tag at auction in 2010. In terms of age, Victorian era stamps tend to be worth far more than their more recent brothers.

Condition

Let us return to our Penny Black example. A used specimen in poor condition can change hands for as little as £10 while an unused version taken from a corner of a sheet where the plate number is displayed could achieve thousands. The 2010 Stanley Gibbons Great Britain Concise Stamp Catalogue lists the price of a mint penny black at £6,500.

A considerable investment: The Treskilling Yellow

Used stamps have historically been worth far less than unused specimens in mint condition. However, unusual or notable postmarks can change matters. A first day cover, that is a stamp that has been cancelled by the sorting office on the day of release, can be potentially lucrative.

Mike Hall, the chief executive of Stanley Gibbons, told the Financial Mail: "The gum on the back of a stamp can be as much as 90% of the value. You don't want to have them mounted in books but kept loose, in special folders."

Authenticity

"The most expensive stamp in the world is the one that is not authentic," goes the old saying.

Buying through a reputable dealer may be more expensive than taking a punt through eBay but you have the peace of mind that the stamp you are getting is genuine. Dealers that offer lifetime money back guarantees are the best type to do business with. Not only will you have confidence that the stamp you are buying is genuine, but future buyers of your stock will as well.

Make a financial commitment to investing

Spending as much as you can afford is a maxim that stands up in this case. The value of a specimen in good condition rises at a far greater rate than a poorer version. Tempting though it may be to buy ten Penny Blacks for £10 each, a far better investment would be one for £100.

Become an expert

Narrow your focus to concentrate on a particular interest, such as a country, period, or subject, such as airmail or error stamps. This will enable you to become an expert in the field, helping you spot trends in the market and possible bargains that may evade less clued-up investors.

Ask advice

Everyone has to start somewhere and the stamp world can be daunting for the novice. Speaking to experts at fairs or in the lead up to auctions can be a wonderfully enriching, and potentially profitable experience.