Why rare stamps are hot investments
Chances are you've never thought of postage as a place to put your money to work. Here's how to invest.
Tuesday's sale of a British Guiana One-Cent Magenta postage stamp (pictured) from 1856 -- the only one of its kind still in existence -- for a record $9.5 million at Sotheby's has put stamp investing back into the headlines.
The price fetched for the world's most famous stamp trounced the previous record auction price for a single stamp, which was 2.87 million Swiss francs (about $2.2 million) set back in 1996.
David Redden, Sotheby's vice chairman, called the sale "a truly great moment for the world of stamp collecting."
Chances are, though, you've never thought of stamps as a place to put your money to work.
So you may also be surprised to learn that stamps are billionaire bond king Bill Gross' favorite investment.
Over the course of his lifetime, Gross has spent reportedly between $50 million and $100 million buying stamps. That's not an insignificant chunk of his $2.2 billion fortune.
Stamps have been also among Gross' most profitable investments. At a charity auction in 2010, Gross sold a small part of stamp collection for four times his cost, and called investing in rare stamps "better than the stock market."
Nor is Gross alone in looking at rare stamps as a place to put his money to work.
At least a third of the estimated 60 million stamp collectors across the globe are Chinese. Another third are based elsewhere in Asia. According The Hurun Report, 64 percent of Chinese millionaires invest in luxury goods, primarily in rare stamps.
With so much money sloshing around in the pockets of Asian millionaires, rare stamps now feature prominently in the Knight Frank Luxury Goods Index. Rare stamps were the second-best-performing luxury asset class in the index over the 10 years through the third quarter of 2013. Only classic cars performed better.
Why invest in stamps?
Rare stamps offer a triple play of diversification, stability and significant upside potential.
First, rare stamps have little correlation to any publicly traded securities market. Second, they are, thankfully, immune from Mr. Market's mood swings, offering slow steady returns over market cycles. Finally, like the Energizer bunny, the price of rare stamps just keep going and going up.
No wonder rare stamps are gaining credibility as a legitimate asset class for investing./
You can now track the price performance of rare stamps just like you can any stock market. London-based Stanley Gibbons Ltd. -- the largest and oldest stamp dealer in the world -- runs the GB30 and GB250 indices which track the price performance of rare stamps. These are available on Bloomberg Financial Professional.
According to Stanley Gibbons, the GB30 Rarities Index has never fallen in value in the past 60 years . During the stock market crash of 2008, the GB30 actually gained 38.6 percent.
Overall, the GB30 Index has generated an average annual compound return of 10.27 percent since 1998. The newer and broader GB250 Index has generated an average annual compound return of 13.18 percent over the 10 years ending in 2013.
To put that in perspective, Warren Buffett's Berkshire Hathaway (BRK.A) returned just 7.7 percent per annum for investors over the same period
How to invest in stamps
Stamp investors know that 99 percent of all stamps issued around the world are not investment worthy.
Bill Gross says that he puts as much analysis into investing in stamps as he does into investing in any fixed-income instrument. By keeping track of the price history of rare stamps at auction, Gross has reportedly built a substantial private library of price records that support all of his purchase and sale decisions.
So, it takes to the right kind of expertise to invest in the right 1percent. You need to know what you are doing -- or find someone else who does.
The good news is you no longer need millions of dollars and attend auctions at Sotheby's to do so.
One place to start is Maryland-based broker Asset Strategies International (ASI) , the North American representative of London-based Stanley Gibbons. ASI offers U.S. investors investment programs for rare stamps for as little as 10,000 GBP, or about $17,000 at current exchange rates.
The Chairman and CEO of ASI-Michael Checkan told me Monday that there has been a huge uptick in interest among his clients in stamp investing. And Checkan expects interest to be boosted by Tuesday's headline-grabbing sale of the British Guiana One-Cent Magenta.
And after the recent big run-up in the U.S. stock market, stamps just might offer the alternative investors looking to push the edge are looking for.
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Yes sure, but collecting and making money investing in stamps requires detailed knowledge of stamps. Researching stamps is tough, since less people collect them and less research material exists. There are countries that produce huge quantities of stamps simply as revenue producers.
Collecting anything is fun, but stamp collectors should be wary!
SURE....stamps, coins, baseball cards......all wonderful "investment" ideas.
I collect mud wasp nests, cat whiskers, and bird claws.
i'm waiting to find my niche big sale!
Think I've got some "magentas" in the collection in the safe, but probably not from Guiana...?
Gonna have to get those collections back out again and have a look...
But I like to collect rocks, they are cheap to get and pretty to look at...
Oh, and old bottles...
Sometimes newer bottles, if they come in a Purple bag.
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