Investing in Stamps
Motivations for Collecting
and Investing
Investing in stamps is something that
I usually do not encourage, for new stamp collectors. I collect for
enjoyment, and I feel that most beginning collectors should focus on the
enjoyment-factor, in order to get the most pleasure out of their
collecting experience.
There has been many an occasion, where I've told someone that I collect stamps or coins, and the first thing they will ask is "How much are they worth?" or "Why don't you sell them?" .... they don't understand, but these two innocent questions INFURIATE me more than anything anyone could possibly say to me about my hobbies! FACT: I DON'T CARE how much my stamps are worth! I don't particularly want to know! And if I sold them, then what would I do? I wouldn't have a hobby to enjoy anymore!
The
vast majority of collectors do not make a profit on their hobby, and
everyone should understand this, to avoid becoming discouraged and very
disappointed. If you buy common, inexpensive stamps for your enjoyment,
they will, most likely, still be common, inexpensive stamps, when you
go to sell them. If you buy very expensive stamps, you will get more
money back, when you sell them, but unless the market really
sky-rockets, which is unlikely,
you're probably never going to get anywhere close to what you actually
paid for them.
The Stamp Market and
Investing in Stamps
But, there are people that do collect with the intention of investing in stamps.
There are opportunities for investing in stamps, but there are also
pitfalls for the collector that isn't careful in their choices.
The collectibles markets, and especially the rare stamp market, do not fluctuate to the extent that the stock and commodities markets do. If you buy a 1 ounce gold bullion coin this week for $1,400 (plus a transaction fee), you can probably sell it next week for $1,400 (minus a transaction fee). With the turn-around, you may only LOSE a couple hundred dollars on the transaction!
Don't keep that coin too long though. I remember the last great recession at the end of 1979. Gold went up to over $1,000 an ounce, and people were buying up gold coins like crazy! About a year later, when the economy recovered, it was back down to about $300 an ounce, where it stayed for the next 30 years! A lot of people were wiped-out by that, and I'm sure the same thing will most likely happen this time around!
In investing in stamps, another thing to consider is that the wholesale to retail formula is much different than that of commodities. On average, good quality stamps retail for about 50% - 60% of Catalog Values, and they wholesale at about 10% - 20% of their Catalog values, depending on the demand for the stamps being sold. Thus, if you buy a moderately priced stamp today, the Catalog value would have to more than double, before you would reach the break-even point on the sell-value of the stamp.
Stamp values,
as with other collectibles, DO INCREASE, with increased collecting
activity, the stamp's desirability, and the demand for the particular
stamp, but this happens over a LONG PERIOD OF TIME. One must remember,
that philatelic investing is a LONG TERM strategy, meaning many years,
or sometimes decades, before the investment can be sold for a profit.
Investing in Stamps
What to Buy
For investing in stamps, buy attractive, well-centered, fault-free, 19th and early 20th Century postage stamps and covers.
For used stamps, this means stamps with attractive, light cancels that are clear but that do not deface the stamp design. For mint stamps, this means lightly hinged or never hinged examples. Mint stamps that have accumulations of old, lumpy, paper hinges, are not as desirable. Attractive classic stamps, with no faults, always do very well at the major auctions.
For covers, the envelopes should be fully intact, without stain or aging marks, and the postal markings should be clear and easily identifiable. Advertising covers and covers showing unusual markings, fancy cancels, or un-common postal rates are also very popular. Covers sent to foreign-destinations, particularly those with colorful transit and receipt postal markings, are especially desirable, and they always do very well at auctions.
For investment quality
stamps and covers, expect to spend a LOT OF MONEY. Top quality
philatelic items can retail for many times more than the valuations
listed in the major catalogs. Investment quality US classic stamps can range in price from thousands to millions of dollars!
This is also
true for the online auction world. Lots that have less demand, will
have little or no bidding activity. Lots with high demand, will have a
lot of bidding activity, and remember that most of the final bidding on
contested lots usually occurs in the last five to ten seconds, before
the lot ends. So, if you see a lot with four bidders, the day before
the lot ends, do not assume that the current bid amount is anywhere
close to what the lot is actually going to sell for.
And, be prepared to enter a sniping bid (your actual maximum bidding limit for the lot), within the last 10 seconds before the lot ends. The bidding frenzy is very intense at that time. There have been situations, where I've submitted a $1,000 "raise" on a lot with seconds remaining, and when it ended, I DID NOT win the lot, having been overbid by another sniper!
Investing in Stamps
What NOT TO Buy
In the Philatelic world, anything issued after 1940 is considered MODERN material. Modern stamps are indeed interesting, collectible, and offer opportunities for philatelic study, but, with very few exceptions, they SHOULD NOT BE PURCHASED WITH INVESTMENT IN MIND! Most people that are investing in stamps ignore these modern stamp issues.
Some
Asian countries have a lot of high-priced modern stamps, especially the
People's Republic of China issues of the 1960's and 1970's. In the last
couple of decades, there has been a lot of speculation in the Asian
stamp markets. Speculators have bought up huge quantities of scarce
sets, souvenir sheets, new year's issues, etc., and that has driven the
prices up for the average collector. My fear is that, if the supplies of
this material are ever unloaded onto the market, the current high
prices may deflate considerably. If you want to buy these issues, then
do so, but only with their beauty and historical significance in mind. Another thing to consider is that you are competing against two billion Chinese citizens, of whom many are stamp collecting enthusiasts.
The same thing, over-speculation, was done with U.S. commemorative stamps of the 1930's and 1940's, and today, they sell for below face value at retail venues. They are even worthless as postage today, as a letter envelope is not large enough to put enough 3 cent stamps to make up the current postage rate on it.
The Zeppelin stamps of the 1930's were heavily speculated in during the 1930's. Many mint sets of the U.S. Zeppelins were saved, and dealers and collectors created many philatelic flight covers for the zeppelin flights. They are expensive today, but they are all relatively common, and there is not enough collector demand for them, in order to drive the prices up substantially.
Also, the colonial commemorative stamp issues of many African countries, Caribbean nations, and Pacific island nations, issued after 1940, have been produced primarily for philatelic revenue. That is, the modern issues of these countries have largely been issued primarily for sale to collectors, and very few of them have been used for actual postal purposes, within these countries. On the issues of the colonial powers, for these countries, I would not recommend collecting anything issued past 1935, for investment purposes.
When investing in stamps, expensive does not necessarily equate to investment potential. A superb quality, inexpensive or moderately priced 19th Century stamp is a much better long-term investment than an average quality, expensive stamp that there is very little market demand for.
Similarly, one should NOT BUY expensive, mint U.S. Colombian
issues, Canadian Jubilee issues, U.S. 1930 Graf Zeppelin issues, etc.,
with investment in mind. They are truly beautiful works of art, and
they make a great enhancement to any collection, but there are plenty of
them around to satisfy collector demand, and their prices do not
fluctuate greatly. Based on the value of the U.S. Dollar, adjusted for
inflation over the years, these issues are not much more valuable now
than they were decades ago.
In Conclusion
In
conclusion, COLLECT or STUDY STAMPS FOR ENJOYMENT. If you sell your
collection someday and make a bit of money on it, then fine. But if you
collect, with a focus on education and enjoyment, you will never be
disappointed.
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Investing in Stamps
