Consistent, strong market returns per annum from rare stamps provide you with the perfect platform to grow and diversify your wealth. An investment in rare collectibles can provide you with longer term security and protection from other economic swings.
Rare stamps have always been a good investment. Legendary investor, Bill Gross knows this all too well, after turning his $2.5 million stamp collection into a $9.1 million profit, "It’s better than the stock market" was Bill's response to his landmark investment. He may be towards the top end of the scale (we don’t all have $2.5m to start with), but he’s not alone. On average, our investments have shown 41% growth in the last 5 years.
Throughout the world there are estimated to be over 48 million stamp collectors, with countries such as Brazil, Russia, India and China becoming heavily involved with the hobby. It is the passion of these collectors that underpins the investment as we operate in the most basic of supply and demand markets – as supply diminishes (rare pieces cannot become any less rare), demand increases with more and more collectors entering the market.
The number of truly rare stamps is exceptionally small. Indeed, at any one time we have over 3 million stamps in stock, but only a small number of these may be considered to be of investment grade.
Rare stamps and some other collectible pieces like manuscripts are also perishable. The last couple of years have seen the destruction of a number of high value stamp collections, including one worth over £200,000 that perished in an Australian bush fire. Some of the rarest pieces are often bought by or donated to museums, thus diminishing the supply of such items even further.
An academic and completely independent study by Elroy Dimson & Spaenjers in 2009 titled, 'The Investment Performance of Collectible Stamps (1900-2008)' concluded that stamps had, "an annualised return of 7.0% in nominal terms, or 2.9% in real terms... higher than those on bonds but below those on equities. Stamp returns are impacted by movements in the equity market, but the systematic risk of stamps remains low. Stamps partially hedge against unanticipated inflation. Estimates of average after-cost returns for individual investors show that stamps may rival equities in terms of realized performance."
In essence, stamps showed a steady annualised return of 2.9% from 1900 to 2008 with little volatility or risk. They proved themselves a good hedge against inflation. Had Dimson & Spaenjers only considered the top tranche of GB stamps (those that SG would recommend for investment), rather than the total universe of GB collectible stamps, that annualised return would have been even higher.
Although the annualised return for equities was at 5% over the same period, once the transaction charges are taken into account, the gap narrows considerably.
Are rare collectibles still a good bet?
The FTSE 100 and other financial markets around the world have seen their worst crashes in decades during 2011. What was the impact of this on the prices of rare stamps and rare coins?
Absolutely nothing. Collectors continue in their relentless pursuit to build top quality collections and investors are increasingly turning to the security of tangible assets, uncorrelated with other asset classes.
In recent months, we have witnessed a rise in the price of premium quality rare collectibles as more investors turn to alternative asset classes as a safe haven and a means of wealth protection. The recent record set for the sale of a single stamp in the UK for £1.1 million demonstrated this.
With news that banks are unlikely to pay a rate of interest that will keep up with inflation for at least the next two years, investing in tangible assets makes a lot of sense. Even more so when taking into account the tax advantages.
Many investors turn to gold in times of panic, but it is important to consider the extent of the bull market that gold has enjoyed over the past few years. I think any downward correction here could be severe. It has happened before...
If you had invested in gold between 1980 and 1985, you would have lost 38%. Between 1995 and 2000, you would have lost 29% of your investment.
Rare stamps on the other hand have a long term history of consistent growth.
Stamp Investment Indices
The GB30 Rarities Index (also Bloomberg listed), the index of 30 of the top Great British stamps has shown a compound growth of 11% over the last 40 years and in its consistency, has outperformed traditional asset classes such as silver gold, the FTSE Tri and the UK housing market. In fact, in the recent recession, when most markets crashed in 2008, the GB30 actually saw a rise of 38.6%.
The key fact is: the index has not dropped in value in any 5-year period over the past 50 years. You can now see why many financial commentators refer to our market as a "safe haven investment".
Click here for full information on the investment indices.
If you’d like to know more about investing in rare collectibles, why not download our FREE GUIDE on ‘Maximising your returns from rare stamps’ or contact us for more information on:
0845 026 7170 (UK) or 00 44 1534 766 711 or email us on firstname.lastname@example.org.
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...