Investing
in Stamps - CLICK
HERE FOR SECOND PART OF ARTICLE
Much time has been wasted over the years by people writing about stamp investment. Even more has been wasted by their readers ! To the
simple question "Are stamps a good investment ?" the
only simple and correct answer must be "Yes, they
can be". But most people who try end up
failing. I've been a full time professional
philatelist since 1975, and my views here are based
on these years of experience. I'll state right from
the start that my general feeling is against
philately being seen as a vehicle for investment.
The following article should be seen perhaps as a
series of notes and comments. There will be no final
verdict, as nobody could possibly be so definite. In most hobbies you spend money and get
little back. At least with stamps you will get some
return. The more careful and astute you are, the
better your return might be. Just think what return
on your money you get from the investment you make
when your hobby is golf, or photography, or
watercolour painting, amateur radio. Stamps can be a good way of putting some
money into something alternative. That is, if you
already have more traditional investments, having
tangible and transportable items can be a kind of
insurance against that terrible day when everything
else fails Investment
portfolios; If the stamps genuinely are good
investments, why do they need to advertise them as
such ? If they are recognised by knowledgeable people
as a good bet, and they are correctly priced, they
will sell by themselves. Does that maybe suggest that
stamps being sold purely as an investment are either
not the best choice of material, or are overpriced ? If
someone bought shares, or put money into a bank, they
would soon be checking up on how much they would get
if they cashed in their investment. Most people with
stamp investment portfolios never do that. Why not ? If a portfolio was
purchased, and the same day taken around reputable
dealers and auctioneers, the investor would probably
be shocked at what a big percentage they seem to have
lost straight away. Of course, take the portfolio back
to the original source and there's a good chance
they'll get a better offer, perhaps just because they
want to preserve their reputation (and of course if
they are still selling portfolios, they can just pass
it on to someone else). The
knowledgeable experienced skilled collector will be
able to spot when something is properly identified and
properly priced. This means sometimes being able to
pick up a bargain, which is always a good way to start
an investment ! They also
recognise when the true scarcity of an item is not
properly reflected in the market price. The astute investment, in any field, is made by somebody making a decision against the general flow of opinion at the time. That is, when everybody else seems to have lost confidence in some commodity and there's many more sellers than buyers, the people who feel sure that the market is wrong can make their move and buy cheap, then wait for their hunch to bear fruit. The same often happens in stamps. |
|
![]()
|
It almost goes
without saying that something sold in very large numbers will
not be a good investment. An example of this in the first day
covers of recent decades (of the UK and almost every other
country). When originally bought by a collector, they were not
priced at a market price (i.e. based on supply and demand) but
at a retail price (based on cost of production and handling,
along with current postage rates). When sold, supply and
demand determine the price. In the UK, such enormous numbers
were sold that the supply is almost certain to always outweigh
the demand. [See our article
on first day covers.]
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
High prices on
some p.packs. (more speculative ?)
xxxxxxxxxxxxx
Public Knowledge and Perception
Much of the public's knowledge about philatelic investments
comes from the general media. The general media know little
about stamps. They generally have little to say on the
subject until they are given a press release. These press
releases are often swallowed whole by journalists, who don't
have the specialist knowledge to know how to question them.
And of course you then have to ask who issued the press
release and why ?
Another thing to remember is that the media seldom if ever
report ordinary items. If we sold an absolutely standard
"Penny Black" stamp for, say, £40 (which we often do), we
wouldn't bother putting out a press release. But if we had
sold a particularly nice penny black, printed from plate
eleven, used on a particularly nice original letter, for
£10,000, and we put out a press release, it would likely get a
headline something like "Penny Black Stamp Sells for £10,000
at Edinburgh Auction" without any explanation as to why this
one was an exception. So people often hear of the big stuff,
and not often of the ordinary.
There are some people who pretend to themselves that they are
investing, where in fact they are looking for a justification
for spending money on their hobby. Be a stamp collector and
proud ! Philately is a great and
a popular hobby, and if you have some disposable funds,
there's no reason why you shouldn't spend it on yourself. It
doesn't have to be logical. Many other pastimes people pursue,
and spend money on, don't make much sense. But for some
strange sociological reason, spending £50 on going to see a
football match is not questioned, spending £50 on a stamp
sometimes is.
Price Indexes
I do not know of any accurate stamp price index, present or
historical.
Every one has flaws. Here's some examples.
{a} Many people, when trying to do historical stamp price
comparisons, simply use catalogue prices. A catalogue price is
not a market price. [See our article
on catalogue prices.] See the "example" box below.
{b} Auction prices are a better reflection of actual market
prices, but prices can be fickle. The same item at two
different auctions can get two quite different prices. Also
any person compiling such a record would have to make sure
that quality was comparable.
Example;
Do Changes in Catalogue Prices Accurately Reflect the
Market ?; In the late-1970s the stamp market was
very strong. In the UK, there was a very good demand for
many Commonwealth countries, and for a while some
islands (e.g. Pitcairn Island, Norfolk Island) seemed to
have an unquenchable demand. Whenever we got in new
stock, it would sell. People kept asking for it even
when we didn't have it. We'd pay higher prices to buy in
stock so that we'd have something for our customers. We
therefore often had to increase our retail prices, and
there were times that the catalogues would be running
behind an increasing market, meaning that at times we
would be charging prices higher than the catalogue
price. When demand eased off a bit in the early 1980s, prices came down a lot, which actually softened demand as collectors lost confidence, which further lowered prices. Catalogue prices were generally reduced at a much slower rate than market prices. So you might find that in 1979, a set with a catalogue price of £4 was selling retail at £4, or even more. A couple of years later the catalogue price might have come down to £3.50, but you could maybe buy the set retail quite easily for £2. While the catalogue price had reduced by 12½%, the retail price had come down by 50%. But a more accute reflection of the decline in price might be what you would call a wholesale price. At the peak of the market, with strong demand and dealers regularly selling out, many dealers might happily have paid 75% of their retail price for an almost guaranteed quick sale and profit. Roll the clock forward and you have the same dealers with sufficient stocks on their hands and no collectors asking for them. The price might have had to go as low as 10% of the catalogue price to tempt them to buy a lot of new stock (and many dealers simply wouldn't buy). In this comparison, the price of a collection with a catalogue price of £400 (and sale price of £300) has gone down to £350 catalogue (but sale price of only £35). That's a catalogue reduction of 12½%, with a wholesale price reduction of 88%. Is a simple list and comparison of catalogue prices at different dates a true reflection of the market ? No it is not. |
Example; In 2007 an academic paper was published by Cris Veld Chris
Veld and Yulia V. Veld-Merkoulova. It can be seen and
downloaded from http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID968343_code903.pdf?abstractid=968343&mirid=1&type=2
In this study the authors extensively quote the "SG 100
index"; in fact it is the only indication they use in their
analysis of stamp market prices. This, in my opinion, is
seriously flawed, and I would argue negates the validity of
the entire paper.
Stanley Gibbons themselves described their index as "the
top 100 most commonly traded postage stamps in the world"
(There's another academic paper by Dimson and Spanjaers which
states in its introduction "This paper uses stamp
catalogue prices to investigate the returns on British
collectible postage stamps over the period 1900–2008.". See
box above.)
Here's an
example of
Price indexes.
Are they valid ? No, because
there is no
independent index published. The much quoted SG Stamp
Indexxxxxxx is put together by Stanley Gibbons, and is based
on their own retail (catalogue) prices.
The SG100 index has been designed to provide the definitive measure of overall market performance and helps to measure individual price increases. We believe that the index highlights the real prices being achieved, especially among the classic Great Britain and Commonwealth stamps.
Our index is based on retail and auction prices for the top 100 most frequently traded stamps in the world. It includes items from all major collecting areas such as: Great Britain, Commonwealth and many foreign countries."
The content list of
the stamps making up the index is not published.
Therefore when they decide to increase their retail price,
they therefore increase their own catalogue price, and if the
item is included in their list, their index total rises.
As the Australian dealer and philatelic journalist Glen
Stephens wrote in an article on
his website dated August 2005 " Stanley Gibbons hold the ace hand as they themselves
set the catalogue prices against which many stamps are
"valued". And I can see they are making good use of this
advantage." . . . and . . . " Many of us
saw all this happen 25 years back with each new SG Catalogue
appearing, and I get a strong feeling of Déjà Vu. Mark my
words - you will see this same pattern occur for several years
to come in SG catalogues. The bold graph on their "Investment"
webpages depends on this occurring."
It should be
pointed out here that their claim that this index is based on
xxxxxxxx most traded stamps" xxxxxxx that this simply is not
true. The "most traded" stamps are quite common !
I have run a
stamp shop for over thirty years. We buy stamps. We do
valuations. We run auctions. In those thirty years I have never
handled a stamp investment portfolio that made the investor a
profit. Not one.
I have however seen good stamp collections which have made a
profit on their cost price. One collection we sold quite
recently through one of our auctions came with a record of the
prices paid. Some of the better stamps had actually been
bought through our own auctions, and in many cases we were
able to resell the same items for at least as much as had been
paid - sometimes adding 50%, and in some cases even doubling
the price after just a few years. The important point here was
that the collector had been knowledgeable, choosy, and had not
over-paid.
Some
of
the portfolios I have seen were shameful. On rare occasions
stamps were included that were simply wrongly identified, or
that were damaged (but sold as fine). More often it has been
common to see that the items included were to some extent
overpriced at the time of sale - sometimes by just ten or
twenty percent, sometimes double or more the price you would
normally have expected to pay in auction or through a
dealer.
It
is
a part of this business I do not like. Too often I've had to
explain to somebody that the £2,000 they spent in 1979
bought them stamps that could have been bought at that time
for maybe £1,500, and that the present market value is only
£700. (The late 1970s were a particularly bad time to buy;
prices were high and investment much vaunted.)
Most people are fine about it, and take it on the
chin, but to some it can come as a great disappointment. (On
one odd occasion I remember a lady being delighted to hear
what a bad buy a portfolio had been, as it proved just how
stupid her ex-husband was !)
As an example of this, a portfolio which had been bought
with the assistance of an investment adviser, and cost
£15,000 in 1979 was entered for sale in one of our
auctions in 2010. Presale estimates totalled just over
£3,000.
A Suggestion;
Have you bought something that has been sold to you "as
an investment" but you now wonder if you have been taken
for a ride ? Why not go straight back to the
seller ? {a} Some sellers have no-questions money-back period, although this is often only about a month. Certainly if you are within that period, just ask for your money back. But even if you have gone past the time limit it is still worth asking - the worst they can do is refuse. {b} It can be worth going back to the original vendor, even if it is some years since the material was bought. A bit of firm but polite pressure might bear fruit. "I was just wondering if the wording of your original advert was entirely legal ? Do you think I should maybe check it out with Trading Standards ?" Many sellers would rather take some financial hit rather than risk their reputation. {c} If you have spent a lot of money, and wonder if you have been unwise, think of hiring the services of an independent stamp valuer. You can find dealers and valuers through their professional trade bodies (PTS in the UK, SPTA in Scotland, or for other countries check IFSDA). That can give you the confidence to argue your case. |
The
majority
of stamp dealers don't involve themselves in the investment
market. A great concern to most decent dealers (and the
majority of stamp dealers are decent, especially those committed to one of the
professional bodies) is that if and when things turn bad, as
they have done in the past, the whole business is tarred
with the same brush.
dealers
selling as investments is beneficial to them; average sale is
larger - rather than a general or specialist collector looking
over stock and perhaps buying little, the investment customer
is likely to spend thousands in one go. Cynically, perhaps the
fact that the average investor is less informed than a regular
collector means that a higher price can be charged. You can
sell stuff across the board, rather than being left with more
unsold stock.
Example;
Here's a couple of scans from a notebook included in a
property we were asked to sell. In this case it is clear
that the intention was investment. That's the actual
word used. The "investor" had joined a movement popular
at the time (late 1960s), and bought some mint sheets of
current UK commemorative stamps. The most interesting
point is that in these notes, a small chart has been
drawn up showing how the value had changed over the
years. At one point cost prices are shown, and these are
compared to catalogue prices from later years, showing
the difference in "value". Unfortunately, that
definition of value is on quite different bases. The
investor has not done their research - they seem not to
have understood that catalogue prices are not directly
related to sale values.![]() ![]() |
Three
definitions;
Investment. Investment is the buying of stamps with a
view, in the medium to long term, of selling them again at a
higher price.
Speculation. A speculator will be interested in
buying stamps to resell within a short time scale - perhaps
days or weeks. Speculation also often involves a degree of
market manipulation, for example seeing one type of material
rising on the market and buying quantities of the same in
the hope that, as well as the price rising further,
that the act of adding to the demand will accelerate any
such rise. The speculator has to be able and willing to make
the well-timed decision as to when to sell, as they are
often active in a market where bubbles will burst.
Trading. If market prices increase while a dealer is
holding stock, this is seen as a bonus, but is not the
intention. A trader buys and sells stamps for a profit
margin, seeing opportunities either to buy cheaper from one
source so that they can sell higher to another outlet, or to
buy items in quantity that can be sold singly or in smaller
groups, and a profit made on the whole.
Example; ; In the early 1970s a syndicate of investors got together and put serious money into buying up quantities of the stamps of Guernsey and Jersey. They advertised aggressively, often advertising to buy at prices above the retail prices being asked by most dealers. This had three effects - firstly they bought many thousands of sets, secondly their actions served to push up retail prices, and thirdly they got thousands of people thinking that Channel Islands stamps were a good investment. This group of new investors themselves created an appetite for many thousands of sets, and they were willing to pay the current high prices. By the time the bubble burst, the syndicate had managed to feed back their large stocks onto the market, but of course at the new high prices. |
These, in my opinion, are the only ways that stamps can be a
good investment;
{1} A good solid collection, with decent quality material
sought out, bought at sensible prices, and assembled into a
desirable collection. A "desirable" collection really means
one that is better than most others. Investing in this way
would entail at least several years of hard work, and the
acquiring of much knowledge. It would almost certainly also
bring with it some serious satisfaction !
In some rare cases stamps and covers can actually increase
in value just by the very act of their being added to an
already important collection.
{2} A collection of almost any type, other than of the
cheapest types of stamps, will always have a resale value.
The "good investment" this way is that you will probably
lose money on the deal, but nothing like as much as you
would if you spent it on other hobbies.
Robert Murray
© Copyright Robert Murray 2008-2015