Investing in Rare and Valuable Stamps

MY BACKGROUND
I have been  involved with stamps in many different ways for over 50 years. When I started  I was just a general collector. I happened to live in the Southampton area which is where the first experimental graphite-lined  stamps were issued and then the phosphor-graphite and the phosphor issues. I did not at the time realise that these would subsequently have more value. I just purchased all the new issues as they came out and I accumulated used stamps, many of them having been posted in the Southampton area. I never paid any attention to the value of these stamps until sometime in the early 1970's I discovered these issues were in great demand and that I had made a good investment. I was able to sell my accumulation to a local dealer for a huge profit.

About this same time, 1969,  I began to specialise in Poland and to dispose of my other stamps. I had decided to go into the Stamp Approval business (just part time). I was now buying and selling stamps. This lasted till about 1975, when, due to my changing my job which reduced the time I had for my "business", I decided to give up. I sold everything except my Poland collection (which I had decided to keep as an investment) to a dealer. This was the period when stamp prices were going up at the highest rate in history. My investment over this period proved profitable.

In 1985, I was then in printing, I first got involved in the printing of a stamp auction catalogue for Southampton Philatelic Auctions. This led to work from other stamp auctioneers, Embassy Stamps, Tony Lester, Worthing Stamp Auctions and others. In total I was involved in the production of stamp auction catalogues for some 12 different auction businesses. I gave up being directly involved, with printing,  in 2005 to pursue other business interests.

In the late 1980's I again caught the philatelic bug to buy, sell and continue with my investment effort. This time I bought large collections at auction, broke them down into smaller lots and then resold them at auction (after extracting items for my own collection). Based on what I bought and sold I made a loss, but if I take into consideration what I put into my collection then I made a little profit. And so I gave this up after some 5 years.

Starting in 2001 for three years or so I was selling postal history on ebay. When I first started I was getting a small return on the time I expended for the items I sold. But I bought much more than I sold and to this day I have been unable to recover the money I spent. Maybe one day I will.

So what am I doing now -  In 2002 I started "investing" in newspaper wrappers. This is an area which at the moment does not appear to have many collectors. I have discovered that there are many rare item being offered at very low prices. Maybe this investment will give me, one day, a better return than stamps.

STAMPS IS A LONG TERM INVESTMENT
Companies that specialise in stamp investment point to the fact that between 1907 and 1990 stamps gave a return of 10% per annum (according to a study by Salomon Brothers Investment Bank published in 1997)

One well documented case is a block of 10 penny blacks postmarked 6 May 1840 on a cover. In 1968 the item sold for £4,800 at Harmer's auction. In 2001 the same item was sold, to Her Majesty the Queen, by Stanley Gibbons for a quarter of a million pounds. Allowing for buyers and sellers premiums this works out at an investment return of just under 12% per annum. (This percentage does not take into consideration any insurance costs over the 33 years.)

I have made a caculation based on the claim that prices of stamps are going up at the rate of 10% per annum. Now the typical cost of acquiring stamps (the buyers premium) is about about 20%, so a £10,000 value of stamps would cost about £12,000. When selling stamps there is a cost involved which is also about 20% (the sellers premium). Using these figures to calculate the profit on investment as an Annual Percentage Rate (APR) you arrive at the following figures. These clearly shows that stamps is not a short term investment (except perhaps in boom times as occurred in the 1970's).  Into these figures I have also factored in the cost of insurance when working out the APR, which over the period of 20 years in this example would be about £1,700. (Nominal Value is the the price for which the "collection" would sell before deducting the Buyers Premium of 20%)