Diversify your portfolio by investing in stamps
Keith Heddle, Investment Director, Stanley Gibbons, tellsChandralekha Mukerji, in an e-mail interview, why it is a good time to diversify your portfolio through stamps.
How do you view the Indian stamp market from the perspective of an investor?
The strength of the domestic market in India is causing exceptional growth in prices. A number of newly wealthy collectors and investors seem keen on buying back all the great Indian rarities. Though this has not gone as mainstream as the interest as in Great Britain or like the recent boom in Chinese material, Indian stamp markets are developing rapidly and we believe they may provide a good opportunity for investment.
With India\’s economic rise, it is only a matter of time before we see the record being broken for Indian stamps, which as of October 2010 stands at ï¿½104,000 (about Rs 74,50,000) for a single example of the 1854 blue and pale red \’Four Annas\’. The time could be just about right to buy into this market before the big buyers get involved.
Are stamps a better investment option than stocks or bonds or just a way to diversify an investment portfolio?
It is both. Rare stamps offer a fine safe investment, where the investor\’s capital is guaranteed, and is coupled with the potential for strong returns in the medium to long term. Over the last few decades, investors seeking alternatives to high-risk stocks and the cyclical property market have increasingly looked to rare stamps. Rare stamps were rated among the top-performing investments of the 20th century, ahead of bonds and foreign exchange with average returns of 10% a year, according to Salomon Brothers. That\’s the kind of return that doubles your money every five to seven years. In fact, rare stamps have outperformed the stock market since 1985.
So, should an investor choose to invest in stamps over traditional investment options?
I would not suggest that investors abandon traditional investments, such as stocks and shares. What we do recommend is that investors recognise the importance of diversification to spread their risk. We recommend that investors allocate around 10-15% of their wealth into alternative assets, which can help to produce more stable long term returns.
Which is a better investment-a single rare stamp or a collection of stamps?
This would depend on the stamp and collection in question. For instance, Britain\’s rarest stamp-the 1904 Edward VII 6d pale purple, overprinted I.R. Official single stamp-has seen an increase in value of 341% in just 10 years. So, obviously, if you had a collection of such stamps, you would be in a healthier position.
However, in reality, building a collection of stamps that could be considered investment-grade is very unlikely. We recommend building a \’portfolio\’ that consists of a range of stamps encompassing a selection of countries and ages to ensure that you have a balanced portfolio.
Any suggestions for novice investors?
As with any investment, we recommend that investors do their own research. Condition, rarity and desirability are crucial to a stamp\’s likelihood of giving a financial return. Therefore, if this is not something you have experience in, my suggestion would be to find an expert you can trust to recommend investment-grade material.