Philatelic

  Investor

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The Investment Market

Underlying Demand

Philatelic Investor does not focus on the hobby of stamp collecting per se but it is important to stress the importance of the collector market on the value of investment grade stamps. Unlike traditional investment vehicles, stamp investment is underpinned by a global collector base of millions of people (quoted figures vary from around 20 million to 50 million, although to what degree these numbers constitute active collectors is open to question). If prices for a particular philatelic item were to drop then, unlike shares where stock can become worthless overnight, the collector base will acquire the material once a price point is reached that make the stamp affordable. There are many more collectors that cannot afford what they would dearly love to own than investor/collectors that are the current custodians. In other words, valuable stamps have a ‘floor’ below which they are very unlikely to fall.

Collectors become very attached to their stamps. Many stamps will remain in collections for decades, probably not being brought back to market until after the death of the owner. Collectors will buy in good times and in bad, regardless of economic conditions. There is no corellation with stock market performance and hence the investment stamp market tends to remain very stable, irrespective of fluctuations in economic markets.

Rare stamps have a distinct advantage over other commodities such as gold and diamonds. Put simply, there is a finite supply and it is not possible for the market to be flooded with new issues. Quantities of many of the world's truely rare stamps are generally well known and it would be highly unlikely for many other examples to suddenly come to light. It is this rarity factor combined with high demand that dictates the steady upward trajectory of market prices.

Historic Performance

Investors in any market should not rely on past performance to guarantee future returns; but it has to be said that stamp investment has provided a consistently good rate of return over a very long period. A report produced by Salomon Brothers in the late 1990’s identified stamps as being in the top four investments of the twentieth century, averaging an annual return of 10.1% (the other three, incidentally, were Chinese ceramics, old masters and diamonds).

Auction records continue to be broken and stamp indexes that illustrate the year on year growth of a pool of valuable stamps, continue to rise. Although it cannot be guaranteed that this will continue ad infinitum, as the concept of stamp investment becomes more widely accepted and understood the interest and demand is likely to grow.

Perhaps unique to stamps is the ability to track prices over the very long term. Price based catalogues have been annually produced since the nineteenth century, providing historical trend data unmatched in any other alternative asset class.

Stamp investment also provides a number of additional benefits:

Diversification
 
Stamp investment provides an alternative asset class in which in which to invest. Importantly, there is very little correlation between the performance of other assets such as stocks and bonds and the performance of stamps and postal history. This enables the investor to benefit from risk diversification but also from a class of investment that is not tied to the fortunes of the stock market, thus reducing overall portfolio volatility.

Portability

An often quoted phrase is that, by weight, investment grade stamps are the most valuable commodity on earth. Whilst this may not necessarily be a primary consideration for many, the ability to easily transport and trade philatelic items around the world can be very beneficial to those that need this flexibility.

Liquidity

The underlying collector base, discussed above, virtually guarantees that there will always be a buyer for good quality stock and that disposal can be rapid if needs be.

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