For those passionate about the history and significance of stamps, investing in stamps can be more than a fulfilling hobby, offering substantial long-term returns. While stamp collecting and investing strategies vary significantly, you could combine both. Like any investment, investing in stamps requires research and specialized knowledge. This guide will cover everything you need to invest in stamps as an alternative asset class to diversify your investment portfolio.
Why Invest in Stamps?
While many stamps have depreciated in value in recent decades, the rarest stamps can be worth millions of dollars and act as a reliable place to store money for the very wealthy. For everyone else, well-researched, semi-rare stamps can offer long-term investment opportunities. Even investing in stamps with errors can be lucrative. In some cases, these are the rarest and most valuable stamps.
Some stamp sellers offer capital-protected investment (CPI) stamp collections of five to seven rare stamps. In this case, you'll share a percentage of the profit with the seller if the stamps appreciate in value after a set time. If they lose value, you'll get your original investment back.
Reasons to consider investing in stamps:
- Portfolio diversification: Stamp values are unaffected by factors that can lead to the stock market or real estate market fluctuations.
- Interest: Stamps can make a historically interesting investment and a passion project.
- Enduring value: The rarest stamps retain their value or may increase over time.
- Improved valuation: The internet has led to improved clarity and valuation around stamps. While many stamps have lost their value, others are now more reliably and accurately valued.
Investors may choose stamps for a variety of reasons.
Historical Significance and Cultural Connection
Stamps offer a glimpse into the past, depicting historical events, prominent figures and cultural milestones. Collecting stamps allows investors to connect with history, culture and significant moments from around the world.
Tangible and Portable Assets
Stamps are physical, tangible assets that can be easily stored, displayed and transported. Unlike some investments that exist only on paper or electronically, stamps provide a sense of ownership and can be enjoyed as a physical collection.
Potential for Value Appreciation
Rare and high-quality stamps have demonstrated the potential for long-term value appreciation. As stamps become scarcer over time from loss, damage or being held in private collections, their value can increase, making them potentially lucrative investments.
Global Appeal and Diverse Market
Stamp collecting is a worldwide hobby enjoyed by enthusiasts in different countries. The global appeal of stamps can create a diverse market, increasing the chances of finding buyers or fellow collectors interested in your collection.
Diversification of Investment Portfolio
Including stamps in an investment portfolio can add diversification. Stamps are an alternative asset class not directly correlated with traditional financial markets like stocks and bonds. As a result, they can provide a hedge against market volatility and contribute to the overall portfolio balance.
The Basics of Investing in Stamps
Before diving into stamp investments, it's essential to grasp the fundamentals of stamp collecting. Understanding these basics will help you make informed decisions as you venture into the world of philately.
1. Types of Stamps
There are various types of stamps you'll encounter in your collecting journey. These include definitive stamps, commemorative stamps and special editions. Each serves a unique purpose and holds different values.
2. Grading and Condition
The condition of a stamp significantly impacts its value. Grading systems are used to assess a stamp's condition, ranging from poor to superb.
3. Stamp Authentication
To ensure the authenticity of rare stamps, consider consulting reputable philatelic experts or certification services.
4. Storage and Preservation
Proper storage and preservation are crucial to maintaining the value of your stamps. Investing in archival-quality materials is a wise choice.
5. Research and Knowledge
Immerse yourself in philatelic knowledge. Understand the history, printing methods and designs of stamps to become a knowledgeable collector.
How to Build Your Stamp Investment Portfolio
If you're ready to build your stamp investing portfolio, consider the following steps for how to invest in stamps:
1. Set Investment Goals
Begin by defining your investment goals. Determine the level of commitment, budget and desired returns to align your stamp-collecting strategy accordingly. Consider whether you want a capital projected investment or are willing to take on the risk of decreasing value. Set your budget clearly and stay within it to protect your overall portfolio.
2. Focus on Rarity
Rarity is a crucial factor in determining a stamp's value. Focus on acquiring stamps with limited editions or unique features. Use internet research tools and speak with philately experts, as changing rarity classifications mean that even some books are out of date on stamps' value.
3. Diversify Across Themes and Countries
Diversifying your collection across various themes and countries can enhance the appeal of your portfolio and attract a broader range of potential buyers. Consider limited editions, stamps commemorating important cultural events or rare stamps depicting key leaders.
4. Stay Informed about Market Trends
Stay up-to-date with market trends, auction results and philatelic news to make informed investment decisions. As stamp valuation has changed significantly in the last decades, staying up to date on market trends is essential. Choose reputable sites like the American Philatelic Society, the Great Britain Philatelic Society or the philatelic society from the stamp's country of origin.
5. Attend Stamp Shows and Auctions
Participate in stamp shows and auctions to expand your network, learn from fellow collectors and discover valuable pieces for your collection. Networking can help in building your philatelic knowledge and understanding of market trends. The exposure you have to stamp shows and auctions can mean you are able to recognize valuable investment opportunities better.
6. Consider Philatelic Funds
If you prefer a hands-off approach, consider investing in philatelic funds managed by experienced professionals. You can also consider capital-protected stamp investments as a way to start investing in stamps.
Is Investing in Stamps a Smart Thing To Do?
For many investors, investing in stamps is a profitable, interesting passion. Investing in stamps requires significant research and understanding. Study information from investing resources, like Stanley and Gibbons' catalog, and local philatelic societies to gain in-depth knowledge.
As with any investment, plan to invest in stamps as part of a diversified investment portfolio with a long-term buy-and-hold strategy. Diversify across asset classes and investment types and within stamp categories. If you're interested in other investment opportunities for your diversified portfolio, consider crowdfunding real estate, buying your first rental property or investing in real estate investment trusts (REITs).
Frequently Asked Questions
Are stamps a good investment?
Yes, stamps can be a good investment. Investment-grade stamps are generally very rare but retain their value.
What makes stamps valuable?
Rarity, condition and historical significance of the issue all make a stamp more valuable. The original and retained color and whether the stamp is used or unused also affect a stamp’s value.
Is stamp collecting considered a liquid investment?
Stamps are considered an illiquid investment because they require more time to sell. Interested investors, while global, are a specialized, limited market, making stamps less liquid than other investments.
About Alison Plaut
Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.