Are rare stamps a good investment?
We monitor the performance of the best stamps – how much they trade for – constantly. The top 250 Great Britain stamps over the last 10 years make up the GB250 Index as listed on Bloomberg (STGIGB25 Index), who are independent and unbiased with no relationship to Stanley Gibbons. Since 1991 this index has shown a compound annual growth rate of 13.4% and has not dipped in that time. You’d be hard pressed to find another asset class demonstrating that level of consistency and stability.
With a steadily growing number of prestige collectors and investors both in the UK and unsurprisingly in the BRIC economies, and a limited supply of investment-grade stamps, prices have risen consistently.
How do results compare?
The figures provided by the GB250 Index refer only to the last ten years. For a longer view look at the GB30 Rarities Index (STGIGB30) also listed on Bloomberg Professional – who are thorough in their due diligence. This index has shown a consistent CAGR (Compound Annual Growth Rate) of 10.1% over the last 40 years. Importantly for you, stamps are not correlated with other asset classes; this was demonstrated clearly in the financial crash of 2008 where the GB30 Index bucked just about every other market trend and rose 38.6%.
Why does it make sense to invest in stamps, especially now?
Investment stamps can provide true diversification within an investment portfolio. This is because they are uncorrelated to other asset classes. This means they tend to be unaffected by the factors that determine the value of other assets, such as equities or property, as the graph above shows. Moreover, investment stamps are a relatively secure asset. Investors therefore use them to preserve the capital they have accumulated over the years. This is especially valuable at times like this, when the 'classic' capital preservation assets – gilts and cash – offer such poor returns.
Gilts are currently so overpriced many experts talk of a ‘gilt bubble’ and some go as far saying they are ‘uninvestable’. Cash, due to the present low interest rates, offers returns below the rate of inflation, so a negative return in real terms. The general consensus is that interest rates are not likely to rise any time soon, whilst inflation may well go up, making cash an even worse investment.
I heard stamps are a bad investment. Is that true?
When people say that, they are almost certainly talking about collectible stamps, those that stamp enthusiasts around the world collect for their own pleasure. Investment stamps represent an infinitesimally small percentage of the collectible stamps available. As the graphs above show, they have a remarkably good and steady track record of appreciation. They do make a good investment if you are looking for healthy returns and stability for part of your portfolio.
The crucial determinant, as with any other investment, is picking the right stamps to invest in. This is why people who want to add stamps to their investment portfolio choose to use our service.
What kind of stamps should you invest in?
There are two kinds of stamps: collectible stamps and investment grade stamps. Collectible stamps: collected by our clients who are interested in philately. They collect stamps for the joy of it, not for investment. Investment grade stamps: stamps identified as having the potential to grow in value. Think about investing in stamps just as you would any investment. Invest intelligently. You would try never buy shares in a badly run company. Equally, don’t invest in poor stamps.
What are the characteristics of investment grade stamps?
Only an infinitesimally small fraction of stamps are likely to increase in value. They are not only very rare; they have to be in a pristine condition, as near as is humanly possible. These are the only stamps we offer to clients for investment. They include everything from Britain’s first and most famous stamp, the Penny Black, to rare stamps from far-flung corners of what used to be the British Empire and Chinese heritage pieces. They also include stamps that are flawed in some way: in this market, mistakes can be highly profitable from the famous “Prussian Blue” to rare, modern-day errors.
Do I need to be a stamp expert to invest in them?
In a word, no. Philatelists buy stamps for the pleasure of collecting. Our investors are primarily interested in money, though many are pleased to be owning something tangible and historical rather than a virtual unit. Many of our clients – perhaps most – have no fundamental interest in stamps. They are interested in securing their capital and in their returns. As we are the world’s leading experts on stamps they naturally turn to us. Stanley Gibbons has a department of 6 investment stamp experts who can help you select the stamps with the potential for the highest returns. You can be as hands-off or hands on as you like. We can build and manage your investment stamp portfolio for you; or you can select your own investment stamps from those our experts believe will deliver the best returns. Alternatively if you don’t have the time or the inclination to do so, you can invest in one of our ready-made investment portfolios.
Who invests in stamps?
There is no such thing as an ‘average investor’ in rare stamps. Some of the world’s most successful investors are keen on stamps. Bill Gross, who runs the $280 billion Pimco fund bought $2.5m of rare British Stamps in 2000. In 2007 they sold for $9.1m. He now has one of the world’s largest stamp collections. We attract entrepreneurs and pensioners, businessmen and women, the curious, the canny, and ironically, both the adventurous and the cautious. They are all drawn by one principal motivation, to preserve the wealth they’ve worked so hard to create and to increase it.
How much should I invest in stamps?
An independent financial adviser, asked about stamps as an investment said:
“I think this sort of investment would be for someone who has all the basic financial basics covered, by that I mean utilising ISA allowance, maximising pension contributions, third party pension payments for spouses and children.”
We would go a lot further than that. We would never suggest that anyone plump entirely for stamps in their portfolio or even as a significant percentage of their portfolio.
It’s normally up to 10% of your portfolio holding, which seems a sensible and cautious ratio. How much you invest will depend on your financial needs and aspirations. The minimum investment we recommend is £10,000, though we also have several seven-figure investors.
Who determines values?
The value of any stamp is determined the same way as the value of everything else you invest in: by what it sells for.
We consistently monitor what investment grade stamps sell for in auction sales around the world. Also, as the world’s premier rare stamp merchant, we take into account our own trade and closely monitor price movements through our worldwide network. All this knowledge feeds into our key catalogues which we publish annually to give the market and collectors a guide price.
With our reputation and stringent quality standards, we set prices based on stamps in ‘fine’ condition or better. Stamps of poorer quality trade constantly at lower levels around the world, which occasionally brings about the accusation that Stanley Gibbons are ‘expensive.’ When you’re talking investment grade stamps, however, the old adage, ‘you get what you pay for’ has never been truer.
How do you make your money?
We make money in a rather old-fashioned way.
We buy cheaply enough to cover our costs and profit when you make your profit.
We have unique buying power, which allows us, quite simply, to buy at below market rate.
This power derives from who we are: the biggest in the market with the most global connections . When people want to sell stamps we are for many the natural first port of call. Our ubiquity means we can also occasionally pick up philatelic gems at auctions which others miss. And our knowledge helps us to avoid poor buys.
We make our money on the 80/20 split of profit when you sell. At that point we take 20% of the profit.
Investment is only part of our business. For example our catalogue publishing business is relatively high margin. This and other divisions generate profit for the overall business.
What guarantees do you offer?
We give you a lifetime guarantee of authenticity on all the rare stamps we offer, the only organisation to provide such assurance. We do not guarantee any rise in value. Only the market can deliver that.
The degree of certainty you have is neither more nor less than when investing in any commodity, equity or fund.
You are told, rightly, that past performance does not guarantee what will happen in future. But the logic is similar to that with other investments. If you buy shares in a firm that has been steadily profitable for over a century, you are probably reassured.
Stanley Gibbons has existed since 1856. Over the last hundred years, according to an independent academic study (Dimson & Spanjaers) the whole market for British stamps has risen in value by over 5% a year (or 2.9% per annum after inflation) – and this is the totality of GB stamps, not investment grade stamps, which would have performed considerably better. To make an interesting comparison, in that period gold has only increased by 0.7% per annum on average in real terms.
To provide a snapshot of past performance refer to the two indices mentioned above – GB30 and GB250.
How quickly can I get at my money?
If you seek an investment where you can put money in and take it out in a year or two, stamps are not for you. This is not a market of quick ups (or downs). It is a tortoise, not a hare. No quick killings. Slow but steady. This is not a market for stock-pickers or dynamic, day-to-day trading. It is this relative lack of liquidity that helps keep the market stable unlike other more ‘easily influenced’ markets that experience high volatility.
Most of our clients invest for 5 or 10 years. You are not tied in, though. You have an early exit option after a year in all our investment products.
How long do I need to stay invested?
We believe the minimum should be five years. Ten is even better. Increasingly, we are seeing investors building portfolios for longevity and for future generations.
Can I hold a stamp investment in a SIPP or IRA?
Not at present, however, the imminent launch of our GB rare stamp fund may change that. If it’s tax advantages you’re after, see the section later on. On the other hand, if you’re concerned about pension provision and want to build up a ‘pot’ over the medium to long term, our Portfolio Builder might suit you well.
Guernsey residents can include stamps in their RATs.
What if the market collapses?
No investment on earth will survive a collapse of every market.
But some are more closely linked to the broad economy than others. They are “correlated” to other institutions, assets or investments and we probably all saw this in 2008/09 when supposedly clever asset allocation came to nought as almost all markets crashed. Never before has everything been so immediately interlinked.
What happens in China affects what happens in the U.S., which affects what happens in Europe – and conversely. It always has.
But not within minutes, or even split seconds as is now the case with computerised trading. This is just one of the reasons behind the current worldwide financial chaos. All the banks are linked to each other, and to the governments, which in turn are linked to each other. But stamps are not related to anything. They are an investment on their own. Prices are not governed by the rest of the economy, but by affluent and committed collectors competing for the best items.
To give an obvious comparison, house and share prices may fluctuate because of what occurs in the economy generally, but prices of investment grade stamps have shown consistent growth and continue to do so.
Governments can print more money. Miners can mine more gold or diamonds. But nobody can print more Penny Blacks.
They steadily rise in value – because they are rare, historical and still sought after. They say the internet and the rise of social media will kill off stamps, but it actually makes the argument for holding a basket of heritage, rare stamps even stronger – they become even more of a rarity.
How financially secure is Stanley Gibbons?
Stanley Gibbons are an AIM Listed company with a market capitalisation of over £50 million. We are debt free and have shown consistent, double-digit growth through the current recession.
Is the market “rigged”? Do you control it?
It is true that we are, and always have been, the largest in this field.
However, to control or rig the prices in a market you must have a “corner”: to dominate it overwhelmingly.
For example, DeBeers which produces 60% of the world’s diamonds is in a position to control the prices of the rest.
The world market for stamps is currently £15bn. We only sell around £25m worth a year for investment – not enough to even slightly distort, let alone manipulate the market.
Not only that, but with our pricing being carefully controlled by philatelic experts (some of whom have been with the business for over 30 years) who are fully in tune with the collector market and global auction realisations, it keeps our prices real and honest.
Which kinds of stamps are worth investing in?
As noted above investment grade stamps must be very rare and in a particular condition, verified by experts and inspected regularly to ensure they remain so. And as also noted, some stamps are valuable because of some unintended flaw or mistake – which by its nature cannot recur.
There are 5 golden criteria when investing in rare stamps – and we live and breathe them, which is why investors trust our expertise:
Where are my stamps stored?
In secure vaults in London & Guernsey, where all investment grade stamps are independently audited once a year. We store and insure your portfolio free of charge and you can see them at any time (with a few days notice).
Who warrants the quality of any stamps I invest in?
There is an independent audit every year as we have mentioned. A philatelist associated with the RPS (Royal Philatelic Society) or BPA (British Philatelic Association) reviews a random selection of over 100 stamps in portfolios and in stock.
This is to verify three things.
First, their condition. If we say a stamp is graded 'superb' with fresh colour, perfect margins and original gum, all key to value, he will check that.
Second, their market value. Are they worth what we say?
Third: their physical existence. Are they there?
In the past 3 years only 3 stamps out of the thousands held have been challenged at audit, with only one challenge upheld.
Can the people in your showroom advise me?
Our showroom at 399 Strand in London is primarily there for the benefit of philatelists – stamp-lovers - not investors.
However, we have Investment Portfolio Managers based at our office in Singapore.
To get advice, have your questions answered, arrange an exploratory meeting or simply have a chat about investment call (65) 6336 6326. Or you can email email@example.com.
Aren’t I better off in gold, fine wines or some other collectible?
For consistency of performance monitored over time, you would find it hard to beat investment grade stamps. As already mentioned, stamp values have continued to climb when gold has shown some volatility.
The BBC reports also that investors have lost around £100M in recent months as a succession of wine investment firms have gone to the wall- almost 50 in the last 4 years. Ultimately though, this is a case of doing your due diligence and balancing your overall portfolio.
Can't I buy these stamps cheaper elsewhere?
The short answer is that it is highly unlikely, and certainly with no worthwhile guarantees of authenticity.
Rare stamp investing is not regulated - is it safe?
It is not regulated by, for example, the FSA.
This is not our choice.
There is a notion that being regulated by that body is a guarantee of protection. It is not.
The FSA aims to prevent people making false or misleading claims. It makes no guarantees. It does not give your money back. It does not prosecute wrong-doers.
It is not unreasonable to say that there is no guarantee of any kind anywhere that can prevent your being exploited.
A chief purpose of this series of answers to questions is to explain how we ensure investors do get a square deal and why.
Quite simply because of our reputation, pre‐eminence and longevity in this field mean it is in our interest to make sure you do.
The fact that over 35% of investors re‐invest with us is perhaps the best testament to their faith in our expertise and the returns we bring them.
Are there any tax advantages?
This may surprise you – pleasantly. There are a number of benefits over income‐generating assets.
That is because they are taxed as a capital gain which has a top rate of 28% against 50% (decreasing to 45% from 6 April 2013) for income.
In addition, you can use your personal allowance of £10,600 (2012‐2013), which can be doubled if you also take advantage of spouse’s.
Capital gains tax rates overseas are generally lower than income and in some areas such as the Channel Isles the tax is nil.
Furthermore, tax can be avoided completely if treated as the disposal of personal assets and the investor puts each stamp into a separate investment portfolio, provided each asset is worth less than £6,000.
Ultimately, though, for tax advice, you should consult your wealth manager or financial adviser.
Do you suggest investing in anything besides stamps?
Due to growing demand from our existing clients, we also offer rare coins and other prestige collectibles such as historical manuscripts, military medals, rare autographs and other significant memorabilia.
Some of these – particularly autographed collectibles - are currently enjoying a boom. The reason is similar to that for the rise in investment grade stamps: they aren’t making any more and they are “history in your hands” as the editor of Forbes magazine put it. Rare coins are also seeing something of a bull market currently.
A last thought:
Whenever a concept is – or seems - relatively new it generates a great deal of hot air, much of it misleading. I hope what you have read here clears that air.
There is no such thing as a perfect investment. Some are better than others. Some are wise, some are foolish.
But if you seek an investment which for over a century has produced steady returns, whose provenance is guaranteed by a firm that has successfully traded for nearly 156 years, rare stamps make sense.
Over the period in which values have been tracked, equities have performed better – but only very slightly. Today it is hard to find a safe haven for your money. You may consider this is a good one. Ultimately, you will make up your own mind and we respect that – however, if any questions remain for you, or you would like to look further into the realities of stamp investment, please contact us.
You can email us at firstname.lastname@example.org – or call (65) 6336 6326 and talk to an Investment Portfolio Manager, who may give you a greater insight than is possible here.