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Perhaps you remember a family member who collected stamps or introduced you to philately, the term for stamp collecting.
Stamp collecting started as a hobby after the first postage stamp was issued in the United States in 1847. As stamps gained different values, people bought and sold colorful stamps from places like Hawaii and Madagascar because they were considered collectible.
In recent years, interest in stamp collecting has decreased in popularity. Nowadays, most stamp collectors are baby boomers and investors. While retirees might have more time for the hobby, they might hesitate to invest in expensive stamps that attract investors.
If you want to know more about how investors buy stamps for their portfolio, how stamp economics works, or current trends in stamp prices, keep reading.
KEY TAKEAWAYS
- Investors try to make money by buying and selling valuable stamps.
- Stamp collection prices are decreasing because more stamps are available, but fewer people want to buy them.
- The worldwide pandemic sparked a renewed interest in stamp collecting.
- Stamps are considered less liquid assets because they usually take a while to sell.
Is Stamp Collecting a Losing Proposition?
In 1988, the American Philatelist Society had 57,815 members, but today, it has less than half of that number. People might not be as interested in stamp collecting anymore, mainly because many stamps are not worth as much as they used to be.
The internet has made it easier for collectors to find the real value of stamps, leading to price drops. This is because collectors have realized that some stamps are not as rare as they once thought.
Stamp value depends on several factors, including the stamp’s design, condition, country of origin, and any special features or mistakes it might have. Stamps with printing errors are often worth more because they’re harder to find.
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Long-Term Returns
Some people see the lower prices of collector stamps as a chance to invest for potential long-term gains. However, most stamp collectors are in it for the stories and history behind the stamps rather than financial reasons.
A study in the Journal of Financial Economics found that British collectible stamps from 1900 to 2008 had nominal returns of 7.0% and real returns of 2.9%. While these returns are higher than average bond returns, they’re lower than stock market returns and similar to art investments. Generally, rarer and more expensive stamps offer better returns for investors.
FAST FACT
The priciest stamp ever sold was a British Guiana One Cent Black-on-Magenta, fetching $9.5 million in 2013 and $8.3 million in 2021.
Stamps can add diversity to your investment mix but shouldn’t replace classic investments like stocks or real estate when aiming for your financial objectives.
Stamps can be hard to turn into cash quickly because finding a buyer might take a long time, sometimes months or years. Also, since stamps are physical items, you must store them carefully to prevent them from losing value.
Pandemic Resurgence in Stamp Collecting
Stamp collecting became more popular again when the COVID-19 pandemic started in 2020. With people spending more time at home, they had extra time to focus on their hobbies, leading to a resurgence in stamp collecting.
When investing in stamps, their value is influenced by factors like how much people want them, current trends, where they come from, and their condition. Stamps that haven’t been used are usually worth more than ones that have. But sometimes, even if a stamp is a bit worn, it can still be valuable if it’s rare.
FAQs
1. What do you look for in an investment-worthy stamp?
Ans: If you want to buy stamps as an investment, try to find ones in good condition, with their original glue or gum intact. Look for unused stamps with gum, used stamps without gum, and rare stamps in great condition. These types of stamps are more likely to increase in value over time.
2. Does it make sense to invest in stamps?
Ans: Investment stamps can help diversify your portfolio because their value isn’t tied to factors that affect other assets like stocks or real estate. They can hold their value independently of stock market trends or real estate price changes.
3. How do you invest in stamps?
Ans: You have two options for investing in stamps: buying stamps individually or investing in a portfolio. With a stamp portfolio, you purchase a collection of rare stamps and hold onto them for a set period, like five to ten years. If the value of the stamps hasn’t increased by the end of the term, the company you bought them from will give you back your investment. But if the value has increased, the company will take a percentage of the profit. This type of investment is considered capital-protected, meaning your initial investment is safe even if the value of the stamps fluctuates.
The Bottom Line
If you want to invest in stamps, it’s wise to collaborate with a trustworthy dealer and stay informed about any developments that might impact a stamp’s worth. Philatelic clubs can also offer valuable guidance and support from experienced investors. Consider the factors influencing a stamp’s value, such as design and perforation.
Although stamps usually experience gradual value growth with minimal fluctuations, their worth can also decrease depending on changes in demand.
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