Few hobbies are persued as universally as stamp collection.

Year after year, millions around the world build, become bored with, and bequeath small fortunes in stamps before moving on to other pursuits.

But while dabblers come and go, only seasoned stamp collectors—philatelists, if you prefer the technical term—know their passion is among the top four investments of the 20th century, producing double-digit returns annually.

Few alternative asset classes can match the portability and profitability of postage stamps. Nor has the long-term performance of any other class of collectibles been so closely monitored and painstakingly documented.

A 2009 study by two finance professors, Elroy Dimson at London Business School and Christophe Spaenjers at HEC Paris, tracked the investment performance of British collectible postage stamps between 1900 and 2008.

Their study, Ex Post: The Investment Performance of Collectible Stamps, pegs annualized return on stamps at 7% in nominal terms, or 2.9% in real terms.

Investors like the idea that collectibles diversify their portfolios and may provide some hedge against inflation and uncertainty, says Spaenjers.

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1912 rare Titanic cover in premium condition

Pre-auction estimate up to $5,000.

1959 St. Lawrence Seaway 5¢, centre inverted

One of the most celebrated errors in Canadian philately. Sold for $10,530.

1851 Victoria 12d black

Sold for $46,800.

1969 Apollo 11 flown to the moon crew-signed cover

Sold for $30,940.

Chinese 1967 Thoughts of Mao stamp

Covers to Germany during this revolutionary time period are very scarce. Sold for $2,499.

The Penny Black

The world’s first stamp.

All images and auction data provided by Regency-Superior Auctions.

To that end, the low beta of the category is consistent with the observation that the financial crisis didn’t stop collectible stamp prices from rising during the 2008 bear market.

The most difficult part of philatelic investment is that it appears easy and the barrier to entry seems low. But investment-grade postage is pricey, says Spaenjers.

“As with other collectibles, you probably want to invest at the higher end of the market,” he says. “The rare stamps in excellent condition will always be sought after by philatelists and can, therefore, serve as a store of value.”

Still, investors must perform careful due diligence.

“Buying through qualified dealers or auction houses can minimize the risk of buying fakes or stamps of lower quality,” says Spaenjers. “Catalogues and recent auction results are tools that help in estimating valuations.”

Another good rule: stick to high-end, rarer examples. Cheaper ones are seldom worth more than face value and postal services worldwide are flooding markets with commemoratives in an attempt to cash in and sell product that’s never used for its intended purpose—mailing letters.

“Transaction costs can be very high in this market; auction houses may charge up to 25%,” he says. “In the case of very cheap items, you are basically buying a worthless stamp, and paying [several dollars] in transaction costs.”

Despite what auction houses and online auction sites will have you believe, there are attendant risks.

“Stamp collecting may fall out of fashion, so the fundamental values of stamps go down,” says Spaenjers. “And since stamp collecting is ultimately a form of luxury consumption, prices may be correlated with the movements of the equity market, providing less diversification than hoped.”

Auction houses like UK-based Stanley Gibbons, famous for its devotion to collectible stamps, insist the opposite is true. Its investment director, Keith Heddle, provides clients with reading material that “outline[s] the rationale for diversification into tangible, heritage assets, uncorrelated with other asset classes and therefore largely immune to standard economic and market swings.”

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