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Last Updated 2017-01-09 21:04:01

The Guide to Alternative Investment

The market for alternative investments

The combination of the sustained low interest rate environment and the equally sustained volatility of the financial markets has pushed increasing numbers of investors to look at alternatives to secure their wealth and diversify their assets

It has been well documented in financial circles that one of the principal reasons so many investors have found their wealth decimated in recent years was not just because the global markets crashed, but because the majority of investors were investing in the same places.

Once panic set in, almost every area of investing was negatively affected as money was pulled out and demand plummeted.There was no diversity in most portfolios which led to the endemic loss of wealth; what people need at a time like that is a safe haven to act as an anchor against such falls.

Art, forestry, fine wine, coins and rare stamps, for example have all come under the spotlight as diversification options. However, in early 2009, prices in popular tangible assets such as contemporary art and fine wine weakened as the financial crisis deepened; areas like this suffered because they had been target investments for bankers’ bonuses.

Art, for instance, saw an 80% drop in value in the last 5-6 years and the market can still be fuelled by seemingly whimsical trends. Wine wobbled too (and was recently hit by a ‘scam’ scandal) and even the recovery due to the Asian bubble slowed when the LivEx wine index fell in 2011.

Of all the various options, rare stamps are attracting significant media coverage in both financial and mainstream press, such as The Daily Telegraph,The FT and Moneyweek, both as a secure option, “a safe haven investment” and one that has historically provided both stability and healthy returns over a sustained period.

The fact that rare stamps can be so valuable and such a secure store of wealth may come as something of a surprise. Stamps are a tangible asset, which means that the moment you take out an investment you become the owner of something physical which is an important piece of history; they are actually the world’s most valuable commodity by weight.

By investing in a stamp portfolio you own a real, rare, prestige collectible that can be traded on the open market.

Key benefits of investing in rare stamps

Rare stamps have repeatedly proven themselves strong and stable through times of economic and political turbulence. That’s what makes them such an attractive diversification option. In an ever-changing world, security and stability seem to have become the primary investment goal.

Completely contrary to the view that (with the advance of electronic media), ‘stamp collecting’ is a dying hobby, exciting times actually lie ahead for the stamp market.

If you invest in quality items today you can hope to see excellent returns over the next ten years as classic, heritage stock becomes increasingly hard to find and both the collector and investor market grows globally, particularly in the surging BRIC economies.

Uncorrelated with other mainstream, more volatile asset classes, the rare stamp market has been showing relentless, steady growth for decades. Even in the turmoil of the recent crash the stamp market remained healthy.

In fact the GB30 Rarities Index, the Bloomberg-listed index of rare GB stamps, grew by 68.3% in the last 5 years and has shown a compound growth of 11% for the last 40 years.That’s the sort of impressive investment performance unheard of in many otherasset classes.

Widening the sample, our recently released GB250 Index has shown a 13.1% CAGR over the last 10 years.

The next “step change” in demand is beginning to manifest itself with new collectors and investors coming from South East Asia and the “Tiger” economies.

Serious interest is growing for the idea of holding rare British Heritage ‘trophy’ assets and money is flowing and growing in Asia and the Indian subcontinent.

Add to that the fact that the average collector is aged 65 plus.That demographic is rising rapidly thanks to the baby boom after World War II and people living longer.What that means is that we have an expected increase in demand for many years to come.

The market is booming at home and abroad.You would be wise to capitalise on our premium alternative assets now.

Our investment grade stamps are actually the world’s most valuable commodity by weight – as the BBC quoted in 2010, “200 times more valuable than weapons-grade plutonium”.

We offer you the chance to invest in a tangible asset that can give you a degree of security in your portfolio with the potential to earn unlimited returns – historically 11% per annum†.

Unlike bonds or gilts, for instance, returns in our portfolios are not fixed, so you can benefit from any growth in the market.

A better investment than the housing market?

In 1970, an average house in the UK would cost you just £4,452. Today, you’d need to be able to afford £162,887 to get the same house. That’s a total increase in value over 40 years of 3559%, working out at a compound average annual increase of 9.4%. Clearly, £4,452 was worth a lot more money back then than it is now, but annual returns over the past 40 years still beat inflation by around 2.9% per annum, hence the well-coined phrase, “safe as houses”.

As an indicator of the strength of the rare stamp market, you may have seen the coverage from the BBC,Times and Telegraph about Stanley Gibbons selling the rarest British stamp for £375,000.That one stamp alone has trebled in value since 2005 whilst the world has been gripped by a global economic crisis and stock markets have crumbled. It has increased in value by 150% in the last 3 years and shows no sign of stopping.

Stamp values are also backed by solid historical data, with stamp prices charted annually back to the 1880s, so increases are transparent and can be tracked.This price data is behind investment indices such as the GB30 Rarities Index, an index that charts the increments of the top 30 GB stamps available on the open market over the last 40 years and which is quoted on Bloomberg Professional.

The index provides a telling snapshot of the value of rare stamps. In recent times, it has recorded a compound average annual interest of 10.8% since 1998. Annual returns beat inflation by an average of 4.4% per annum.

Perhaps more importantly, the index has not dropped in value over the past 40 years.

You can now see why an increasing number of financial commentators are referring to our market as a “safe haven investment”.With a compound average annual increase of 11.1% versus 9.4% for property investment, it’s fair to say that rare stamps are safer than houses.

Rare stamps more stable than gold?

In times of uncertainty, gold has always been a popular choice amongst risk-averse investors as a safety net. Just recently, investors piled into gold and as many warned, created a bubble which has recently burst. Like most markets, the price of supposedly safe gold is still driven by panic or by greed – unlike the market for rare stamps and coins which is fundamentally driven by the long-term passion to collect.

Just to highlight that point, we’ve been here before…If you were invested in gold between 1980 and 1985, you would have lost 38% and between 1995 and 2000, 29%.

Although the price of gold soared to record heights in 2011, it then fell back sharply at the end of the year, dropping almost 20% - becoming a bear market. So gold is only safe if you get your timing right – not always the perfect safe haven investment for the longer term. And with inflation rising and financial uncertainty still investors’ primary concern, an asset showing steady but strong increases is worth its weight in gold. Or perhaps that famous saying should be changed to “worth its weight in rare stamps".

Start your portfolio with Stanley Gibbons

When it comes to investing, it is always vital to go with a name you can trust. Stanley Gibbons is the name you can entrust in given its track records. You may wish to find out more about the investment plans through Singapore Gold Coins Investment Pte. Ltd. by emailing us at info@sgcoins.com – or call (65) 6336 6326 and talk to an Investment Portfolio Manager, who may give you a greater insight than is possible here.

A sample stamp portfolio with Stanley Gibbons

Here is a selection of the type of rare stamps that Stanley Gibbons offers for investment purposes. Look at how their prices (taken from Stanley Gibbons published catalogues) have risen in the last 10 years.

 

 

The prices of rare stamps is fully trackable with the prices recorded in Stanley Gibbons official, annually-published catalogues, the first of which was published in 1865.

They represent the selling price of Stanley Gibbons Limited at the time of publication and are an expert estimate of market value, taking into account prices realised at worldwide auctions and reported private sales.

As well as rare stamps, Stanley Gibbons also offers you investment opportunities in rare coins, wartime medals and historical manuscripts as further options for diversification and portfolio growth.

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