In times of uncertainty, gold has always been a popular choice amongst risk-averse investors as a safety net and is now surging ahead again (provoking fear amongst financial analysts of a potential ‘bubble’ which might burst).
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%. So gold is only safe if you get your timing right – not always the perfect safe haven investment for the longer term.
Look at the graph below, which clearly emphasises the volatility of gold and property (as well as other conventional investment vehicles) and the strength of the premium stamp market. It demonstrates the rise of the GB 30 Rarities Index (listed on Bloomberg), which is the index of the top rare GB stamps.
As you can see, increases in the GB 30 stamps have been consistent and, in some cases, dramatic. Just as a snapshot of the strength of the market, in the recent crash of 2008, when the value of traditional asset classes plummeted, the GB30 Rarities Index increased in value by 38.6%.
In 2010, the GB30 Rarities Index went up by a further 7%, showing real stability and continued growth counter to the current difficult economic conditions and the volatility in other markets.
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”…
Did you know that stamps are the most valuable commodity on earth by weight? Some rare stamps are worth 200 times more per gram than weapons-grade plutonium.
"One of the hardest factors to evaluate is whether or not an asset deserves a place in a portfolio. If an asset class can be added to a portfolio and reduce the volatility of the portfolio whilst at the same time not reducing its overall return, then that asset in a valuable component. Stamps have virtually no correlation with equities at all making it is a very good asset to hold in a portfolio."
- Joe Roseman, Portfolio Manager, Strategist and former Head of Economics at Moore Capital 1994-2010 and author of SWAG - Alternative Investments for the Coming Decade
Rare Stamps - 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 recent coverage from the BBC, Times and Telegraph about Stanley Gibbons selling the rarest British stamp in a deal worth £400,000. This 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. Over the past 40 years (1970-2010), the index is up 6403%, giving a compound average annual increase of 11.1%. And remember, the index has performed even better in recent times, recording a compound average annual interest of 12.8% 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.
Find out more about the rare stamp investment indices.
Stanley Gibbons’ world famous stamp shop at 399 Strand, London is a collector's paradise, selling everything you could need – stamps, catalogues, albums, accessories, and much more...