Is Stamp Investing Still a Lucrative Hobby?

When something as small as a stamp can sell for a world record $8.3 million, it makes stamp investing no longer a hobby! Like anything which has others willing to pay money for it, stamp investing can be lucrative. Some caution is advised though, the stamps a collector will buy versus an investor are vastly different. 

Takeaways

• What is stamp investing

• Why they can make you money

• Are you ready to make money patiently without stress?

Why invest in stamps?

They are a form of diversification. Their price is not linked directly to the state of the economy. Unlike shares and property whose volatility is linked to the health of the world or a countries' economy, the price of stamps are driven by demand from buyers.

The Stanley Gibbons Stamp Index which was compiled using historical data of stamp prices suggests that even in times of financial crises their value appreciates.

Are stamps appreciating in value?

Yes they are, and there is anecdotal evidence that investing in stamps is growing. When a publication such as Forbes starts to run a series of articles on stamp collecting as a way of making money, then there must be some readership demand for it.

There is also factual evidence, which shows how the prices of 200 rare investment-grade Chinese stamps have a compound annual growth rate of 11.6 percent over 23 years.

Rare stamps such as known US and European ones can be quite liquid as there is usually demand from dealers who know they can sell them on. This would suggest their value is likely to keep increasing. Strangely some stamps can be worth more if they used than unused! In this instance the cancellation mark should be similar to the time period when the stamps were first issued.

Can I make money collecting stamps?

In short yes. In particular if you focus on some niche areas where you can understand the demand sooner. Many stamp investors will focus their attention on particular themes. Examples will include periods, countries or features (e.g. stamps with animals on them).

The stamp headlining this article is from Soviet times. As these are no longer produced, there is a finite amount of them. This increases the chance of their value increasing. Such 'historical' stamps can be interesting to collectors (and therefore stamp investors) as they may allude to a specific historical event.

Historical events are rarely forgotten due to being written about or taught at schools and universities. This means such stamps will likely attract attention. They may not be ideal to buy as a novice investor but an experienced stamp investor will keep hold of them!

What makes a successful stamp investor?

You have to be passionate about stamps with an eye for value. By being a collector first, and an investor second, you will not mind spending long period of time reading about something where you will not earn much for years. Let's be clear, for the amount of time you put in, stamp investing will not reward you compared to other more traditional investments.

As a result, you are more likely to profit if you have some of the following traits:

• You are passionate, you will regularly read philatelic books and publications (especially when you start off).
• You will build a collection slowly over a period of several years gaining knowledge, confidence and an ability to spot value
• As you increase in age, wealth and experience you will be prepared to bid for expensive stamps which are sought after...
• ...And you will understand which stamps have the greatest number of collectors seeking them and will therefore increase in value
• Due to stamp collecting being your hobby, you are patient and will not look to sell a stamp for 10 years, allowing your collection to rise in value.

Or alternatively...

You could actually buy shares in the Stanley Gibbons, the world's longest established rare stamp dealer, themselves. They are listed on the UK's smallest and riskiest stockmarket: AIM. Investing in the stock market is higher risk and this is something that you should understand. It is the contrary to stamp collecting due to the inherent volatility.

There are risks to be aware of...

Although there has been an increase in coverage of stamp collecting and investing, younger generation may not be all that interested. Younger generations are more interested in technology and travelling. This requires one to ponder if the amount of stamp collectors is growing.

If they are growing, then the value of investor stamps will increase as more people bid for less stamps. There has been a suggestion that as our life is ever-dependent on technology. Some in the younger generations are seeking hobbies and interests where no technology is involved.

As with any investment you should give yourself a margin of safety. All the more so with stamps as they are not covered by the FSCS investment scheme.

Selling stamps are also dependent on demand. You may find that there is no one to buy them when you want to sell them. They are a form of iliquid asset and are not a good short-term investment. The commission that stamp dealers will charge you makes trading stamps unappealing. As a result they should form a small part of your portfolio.

Conclusion

As with coin collecting and art investing, investing in stamps has become fashionable to mainstream investors. Although there is money to be made, you must ensure you are actually interested in philately. This is due to it being a time-consuming process to find stamps which may have value. Stamp investing is not a get risk quick scheme.

Those who will be successful will be prepared to devote the next 15 years of their spare time to discover a new world of knowledge. In parallel, their collection will slowly grow in value as they accumulate stamps of interest. Do you have the passion and patience for this?