Philatelic

  Investor

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Who To Buy From

There are two main sources of investment grade stamps: dealers and auctions.

Dealers

There are thousands of stamp dealers across the globe. Many are full time, long established businesses, some of which who have been trading under the same name since the nineteenth century. There are many more who work on a part time basis or as a hobby, often as a means of supplementing income to acquire stamps for a collection and to sell on duplicate or unwanted material.

However, dealers that maintain a reasonable selection of stamps or postal history for investment purposes are relatively few. There is no minimum price at which a stamp is considered worthy of investment potential but anything priced at less than £500 would not typically be recommended for a portfolio.

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Most investment grade stamps will be priced at substantially more than this so a dealer that aims to offer a reasonable selection of material will need to have a significant amount of capital tied up in stock. While owned by the dealer, the likelihood is that the stock will probably be steadily increasing in value. Stamps, however, do not pay dividends or earn interest and to make a living, stamps need to be bought and sold.

The dealer will usually have acquired his stock either via auction or by private sale. It is not unusual for a collector to have purchased material from a dealer over a number of years and then sell the same items back to the dealer at a later stage. Valuable collections may be offered to a number of dealers in attempting to find the best result. A collection may then be broken down into its component parts with the most valuable material being promoted or sold on as investment grade stock.

Dealers in fine material will often specialize in certain countries, regions or types of stamp such as errors or have specific areas of philatelic expertise. Although most country specific specialists trade from their home country, investment material can be found far from home. Thus rare US items may well be available in Germany, Australian material in the UK and so on. Although the majority of dealers are principally catering to the collector market and dealing in more readily available stamps, a small selection of suitable items may well be available and worthy of consideration. What is important is the provenance and quality of the material, certificates of authenticity where appropriate and the reputation of the dealer concerned.

Most dealers will produce some form of hard copy catalogue with illustrations of key items although web catalogues have rapidly become the primary ‘shop window’ in recent years. Scans should be clear, of a suitable size to ascertain detail and descriptions comprehensive and honest with any defects truthfully described.

Dealers make a living from the margin made between the buying and selling of stamps, not unlike the bid/sell price of a stock. It sounds obvious but is important when thinking about how long one is prepared to hang on to one’s investment before realising any potential gain. Unless another dealer is prepared to put a higher valuation on the item than the dealer you originally purchased the stamp from, you will need to wait a period of time for the stamp to appreciate before you reach the point that the buy/sell margin has been absorbed into the selling price and you are able to realize a profit. The alternative is to sell at auction but without the guarantees that a negotiated price would bring.

A recent innovation is the introduction of contracts which guarantee the investor a minimum annual return, provided a portfolio is held for a fixed contract period. For example, you invest in a £25,000 portfolio of stamps over a 10 year period at a guaranteed rate of return of 6% per annum and a minimum return of £40,000. This provides the advantage of potential high returns with the comfort of a minimum return with full ownership of the asset. Contact us at enquiries@philatelicinvestor.com if you would like more details on these schemes.

Auctions

On nearly every working day of the month, somewhere in the world, a philatelic auction is being held. By far the majority of these auctions are aimed at stamp collectors although stamps suitable for investment may well appear in the lots. Most auctioneers will produce a hardcopy list of the lots available: everything from a few sheets of photocopy paper through to lavishly illustrated glossy books for auctions of very fine, rare material.

Similar to the situation with dealers, there are relatively few auctioneers that specialize purely in investment grade stamps. Some may well have ‘general sales’ interspersed with the occasional sale of rare items. Notable sales are those where a significant collection, often built over the course of a lifetime by a named individual, is offered to the market. When rare items that are not readily available in the market come to auction for the first time in a long while, competition can be fierce and spectacular prices achieved.

For the philatelic investor, the auction room can offer opportunities to acquire material at a price lower than that offered by a dealer. However without adequate knowledge of scarcity, demand or true market value, it can be easy to spend a substantial amount of money on items that may take many years to recoup the investment cost. Stamp collectors are driven by passion. Two passionate stamp collectors with the funds to support their hobby, both vying for the same item may well drive the price of a stamp to very high levels. As a selling investor, this is just the scenario you would wish for. As a potential buyer however, competing with collectors whose motivations to buy are very different from your own, may mean you end paying a significant sum for something that may take many years to recoup the cost. Caveat emptor.

Many of the world’s rare stamps are well known and their ownership can be traced over a number of years. Indeed, auction houses may well be reselling lots that have past through their hands a number of times before.

Many auctions are now accessible online, offering the ability to peruse and bid on lots around the clock, irrespective of geographic location. You do not need to be physically present at the majority of auctions: provided your credentials are robust, you submit your bid and await the results. We would caution buying investment grade stamps online unless the seller’s identity can be verified and trusted, particularly in the case of eBay.

Where investment grade stamps are concerned it is not uncommon for a buyer to be represented at auction by a philatelic agent. The agent, being physically present, is able to inspect the lots in detail and provide first hand feedback to the prospective buyer. The buyer’s identity can remain confidential and the agent, by keeping your maximum bid private, can attempt to secure the lot at the lowest possible rate. Philatelic agents may also offer global search services where requirements are registered and the prospective buyer notified when a suitable lot is brought to market.

Rare stamps bought at auction will often come with certificates backing up their authenticity. After a successful bid, stamps without certificates can usually be given an ‘extension’ whereby the purchased stamps are sent for expertising post auction. If the assessment is negative and the stamps are proven to be misdescribed then the auction house will return the amounts paid. In this regard it is important to check the individual terms and conditions of the auction house concerned.

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