Philatelic Investment, the investment of funds in collectible postage stamps for the purpose of realizing a profit, is a relatively recent phenomenon. Stamp collecting has long had the reputation of being an unprofitable hobby for most beginning collectors; nevertheless, investing in stamps is growing in popularity among more advanced collectors. Rare stamps are among the most portable of tangible investments, and are easy to store. They offer an attractive alternative to art, other collectible investments, and precious metals. In addition, for those wary of investing in single-country mutual funds or individual stocks of developing nations, stamps may provide the advanced collector/investor with a means of profiting from their economic growth.

For those interested in investing in stamps (or in any collectible, for that matter), the acquisition of knowledge is the most essential and most valuable investment. Since this endeavor requires a significant outlay in terms of time, although not necessarily money, the prospective philatelic investor is at an advantage if he actually collects stamps, or is a former stamp collector. A stamp investor should have substantial knowledge of classification, condition grading, authentication, handling and storage, stamp dealers, clubs, auctions (including online auctions, such as ebay ), and shows, the stamp market, as well as a general knowledge of worldwide stamps and a deeper knowledge of his chosen areas of specialization, among a host of other things too numerous to list. In other words, he should have many years of previous experience as a stamp collector or dealer behind him before embarking on a program of investing in stamps. Philatelic investment is not a game for dilettantes.

Like all commodities, the value of a stamp is determined by supply and demand. The factors which determine a particular stamp's supply are the stamp's printing quantity and the quantity of stamps destroyed. Since many collectors prefer to collect unused and undamaged stamps, the quantity used and the quantity damaged also affect collectable supply (since what is considered collectable varies). Printing quantities of stamps are not always available, although some stamp catalogues list printing quantities, when they are known. Quantities used, damaged, or destroyed over time are never known. Generally, the printing quantity, if known, is the only reliable information one has. For this reason, a low printing quantity for a stamp can be an attractive feature for the investor to consider.

Demand for a stamp depends largely on the following factors: the stamp's country (or area) of issuance, topical or thematic appeal, and collectors' or investors' perceptions as to its current or future value. These factors are summarized as follows:

Country (or area )of issuance- most stamp collectors within any given country collect their country's stamps; for instance, most American collectors collect U.S, most Swiss collectors collect Switzerland, etc. Some collectors collect areas (such as the Netherlands and Colonies, or British Asia) or regions (such as Latin America).

  • Topical appeal - many stamp collectors focus on stamps which picture particular popular topics, such as Sports, Nature, Art, Religion, Space Exploration, etc.

  • Perceptions of value - these influence demand for stamps in the same way that perceptions influence demand in the stock market. Increasingly, the perceptions of collectors/investors as to a stamp's future value play a part, as well.

  • Given all of this information, how does the investor make a judgment as to whether to focus on a particular stamp? The main questions that the investor should ask are:

    • Which countries or collecting areas will experience an increase in demand over the long term? and
    • Within these collecting areas and given the available knowledge concerning supply (printing quantities), which stamps are undervalued, and should be targeted for investment?

    Two types of trends of increasing demand are relevant to philatelic investing: country/regional trends, and topical demand trends.

    Country/regional trends are largely dependent upon economic development. Historically, stamps of countries which have experienced long-term economic growth and an expansion of their middle classes have risen in value accordingly.

    To an extent, however, cultural factors come into play: for various reasons, certain countries have higher proportions of their populations which collect stamps than other countries, although the stamp collecting proportion of a country's population is often very difficult to measure, due to widely varying degrees of dedication to the hobby. Is anyone who ever saves a single stamp a stamp collector? If so, then there are probably about 5 million stamp collectors in the U.S.. If, however, one wishes to account for only "serious" stamp collectors (those spending $150 or more per year on their hobby), there may be only about 200,000. In terms of proportion of the population, this compares unfavorably with most European countries, notably Germany, in which there are probably 1 - 2 million serious collectors, and perhaps 8 - 10 million "unserious" collectors.

    Demand trends for various topical categories are based on a wide variety of factors, some of which are demographic, and some of which relate specifically to an individual topical, or group of topicals. An example of a demographic trend which might affect a topical category is a trend toward upward mobility among a particular ethnic or racial group. If, for instance, Polish Americans experienced an upwardly mobile trend, stamps feauturing famous Poles or Polish themes might increase in value. Factors which relate individually to topical categories which can influence demand are numerous, and may include: anniversaries, media spectacles (such as blockbuster films), moral crusades, etc.. Such factors have a short-term effect, or they may be elements of long-term trends.

    An example of such a short-term fluctuation in the demand for a topical category was the brief "boomlet" in Princess Diana issues which occurred following the popular British royal's sudden death. For about a year or two after the tragedy, Princess Di stamps issued by various British Commonwealth nations often sold for up to ten times their catalogue value when offered on ebay. Most of the buyers of these briefly popular issues were not, of course, "serious" stamp collectors. To experienced collectors, the mania for these issues was so obviously driven by the sensationalist popular media that it was clear that the price spike was an overblown, extremely temporary anomaly.

    Since cultural factors are difficult to gauge or project, and demand trends for various topical or thematic categories must be analyzed individually (because they follow no consistent, general pattern), the investor initially should focus on the country (or region) of issue, its prospects for long-term economic development, and growth of a middle class. A few lessons from history will be instructive:

    -Following their defeat in World War II, the economies of both Germany and Japan were in a shambles. Most Germans and Japanese were very poor; consequently, very few could afford to spend money which they needed to survive on collecting stamps, and most of the unused stamps collected from these countries during the postwar period were sold to collectors in other countries and American GIs. As their economies grew, German and Japanese collectors bought back their own stamps, and prices for these early postwar stamps rose dramatically.

    -Mainland China (or the People's Rep. of China)- because Maoists despised stamp collectors as reactionary counter-revolutionaries, stamp collecting was illegal in the P.R.C. while Mao was alive. Most stamps collected from the P.R.C. during this period were sold overseas to American and European collectors in order to generate foreign exchange, and the printing quantities of some issues were very low (100,000 or fewer). For many years, demand for stamps of the P.R.C. was also low, however; most Chinese collectors outside of China weren't collecting them, those inside weren't allowed to, and interest among non-Chinese was minimal. P.R.C. issues were considered "wallpaper." All of this changed after Mao died, the prohibition against stamp collecting was repealed, and Mainland China became more capitalistic. Current estimates of the number of stamp collectors in China range from 10 to 50 million. As always, this is impossible to gauge, but what is clear is that many issues of the P.R.C., especially some of those issued during the Cultural Revolution period, have risen 10- to 100-fold.

    -the Asian "Tigers" - certain Asian nations have experienced rapid economic growth in recent decades, along with a corresponding increase in value of their stamps. These include: South Korea, Thailand, Taiwan, and Singapore; others which are not nations but have experienced similar price appreciation in their stamps are Hong Kong and Macao.

    The lesson from these examples is obvious: first, find countries which have good prospects for long-term economic growth. Once this task is accomplished, the investor's focus must narrow, in order to determine which stamps within the selected country or countries should be targeted for investment.

    Unlike a normal stamp collector, who generally tries to "fill the spaces" in his album, and obtain as many different stamps of the country that he collects as he can afford, the philatelic investor endeavors to find those stamps within his chosen collecting area which will increase in value the most over time. He will frequently be looking for only a few different issues of a particular country, and will buy multiple copies of those issues. If the supply of these targeted stamp issues is small enough, such hoarding by the investor may very well deplete the supply sufficiently in order to accelerate price increases, even without overt attempts to manipulate the market (such as advertised buy lists), by the investor.

    Once the investor has selected a country or countries, he must then "hit the books"- researching printing quantities of the various stamps issued by that country, comparing these quantities issued to current catalogue and market values, possibly making guesses as to the proportion of stamps remaining in collectable condition, and assessing the topical (or other)appeal of various issues that he's analyzing.

    This is a complex, arduous, but often interesting and rewarding process. An illustrative example of how such research might proceed is in order:

    For various reasons, a philatelic investor might decide that Latin America (Central and South America, and the "Latin West Indies"- Cuba, Dominican Rep., Haiti) will undergo a "democratizing" trend - significantly reforming its corrupt and oligarchical political/economic systems and undergoing accelerated economic development in the coming decades.

    He knows that the population base of Latin American stamp collectors is largely derived from two groups - single country and Latin American region collectors within Latin America, and Latin American emigres, most of whom are in the U.S.. Hence, the population bases and economic fortunes of individual countries within the group, while significant, are not of overriding concern.

    He focuses on Venezuela, a nation of about 20 million people, immense wealth from oil and other natural resources, and an affluent, educated elite class pretty much riding atop the other 95% of the population. A political and economic situation which is currently problematic, to say the least, but which probably can't get much worse, and which he believes will be more or less resolved for the better in the coming decades.

    Thumbing through a Michel South America Catalogue (Michel is a German catalogue firm which produces fine stamp catalogues which frequently list printing quantities for stamps), the investor comes up with a list of Venezuelan issues which have what he believes are low printing quantities in relation to their current catalogue values- in other words, undervalued stamps.

    Among others on the list, he finds the following:

    - Venezuela 1944 World Amateur Baseball Championship Games, Airmail Set (Scott # C189-97) - Printing: 10,000

    (Note: since the writer of this article has only a 10-year-old Scott Catalogue on hand, the catalogue value of this set is quoted as $49)

    He concludes that this set is probably grossly undervalued, given its very low printing, low catalogue value, projected number of future collectors of Venezuela and Latin America, and the growing popularity of Baseball topicals. He decides to aggressively buy as many of these sets that he can find at a reasonable price. If he manages to accumulate several hundred sets, which is extremely unlikely, he may attempt to overtly stimulate demand by advertising to buy them.

    During his research and analysis, the investor may find 10 or 20 Venezuelan issues that he wishes to target in this manner, as well as a number of issues from other Latin American countries. Each country and issue has its own "story," its own set of relevant data, and its own prospects. Will certain Cuban stamp issues appreciate rapidly in value after Castro dies and Havana embraces decadent and hedonistic capitalism again? As soccer becomes more popular worldwide, will a Costa Rican Soccer topical set with a minuscule printing shoot up in value? Such questions are the domain of the philatelic investor, a once rare but increasingly prolific breed of stamp collector.


    Appendix A

    • Some Notes Regarding the Vagaries of Condition and Supply

      • Postally Used Stamps

    While it is true that, worldwide, most collectors prefer unused stamps, many will also collect used, and some collect used stamps exclusively. Generally, unused stamps of an issue are worth more than the used stamps, and often, considerably more. There are some major exceptions to this rule, however: in some cases, legitimate and contemporary postally used stamps are rarer and more valuable than the same stamps unused. Many stamps issued by Germany during its infamous inflation period are worth far more used than unused, because they could only be used for a short time, after which they became virtually worthless, due to runaway inflation.

    Usage rates vary widely from stamp to stamp, and, of course, some stamps purchased by collectors from the post office may be saved for a few years, and then used. Generally, unless a stamp is heavily speculated upon or popularly collected when it is issued, I would estimate that at least 98% will ultimately be used. I differ with the U.S.P.S. on this question; the Postal Service once estimated that 15% of the stamps issued by them are collected, but I disagree because I believe that most of those collected for a brief period after issue will eventually be used.

    • Concerning Supply

    In many cases, inexpensive stamps increase in value at a greater rate than expensive stamps of the same issue, over time. This paradoxical fact flies in the face of conventional thinking regarding investing in collectibles: that one should try to buy the rarest and most valuable items and hold onto them. There is a logic to such a trend, however: if a stamp is valuable, great care will be taken in handling and storing it, and if it is very valuable, there won't be many collectors who can afford it. If a stamp is inexpensive, however, more will be damaged or destroyed over time, and the high rate of attrition of supply coupled with its affordability to most collectors will contribute to a faster growth in value.

    For examples of this, one need only look to some of the early U.S. issues, and compare the catalogue values as multiples of original face values in the low and high values of the set (which have a much lower printing quantity than the low values, and are therefore much scarcer) as follows:

    ISSUE/ DENOMINATION............ Scott '01 CV.....CV as multiple of FV

    1869 Pictorials -

                     1c, Unused     700.00          70,000
                     2c, Unused     650.00          32,500
                     30c, Unused  6,500.00          21,666
                     90c, Unused  8,750.00           9,722

    1890-93 Definitives -

                         1c, Unused  27.50           2,750
                         2c, Unused  22.50           1,125
                           (most common type of 2c)
                         3c, Unused  72.50           2,416
                         30c, Unused 325.00          1,083
                         90c, Unused 500.00            555

    1893 Columbians -

                          1c, Unused  25.00          2,500
                          2c, Unused  22.50          1,125
                          3c, Unused  62.50          2,075
                          $4, Unused 3,250.00          812
                          $5, Unused 3,750.00          750

    1898 Trans-Mississippi-

                           1c Unused    30.00        3,000
                           2c, Unused   27.50        1,375
                           4c, Unused  150.00        3,750
                           $1, Unused  1,250.00      1,250
                           $2, Unused  2,100.00      1,050
    Damaged Stamps

    Most collectors prefer to collect undamaged stamps in the best condition attainable. However, an increasing number are also willing to accept damaged stamps, also known as "seconds." The reasons for this are economic. If a collector wishes to purchase a scarce stamp which has a catalogue value of $2,000, he may expect to pay about 70% to 100% of catalogue value for it if it is in premium condition. If, however, he is willing to accept a VF-appearing example of the same stamp, with a minor defect, he may have to pay only 10%-20% of catalogue value. If he's willing to accept a "space-filler" of the same stamp- an uglier example with a major defect, he may be able to find one for 4%-6%, or less, depending upon how horrible it looks.

    The trend toward collector acceptance of seconds implies an unexpected and counter-intuitive prospect, in terms of their investment potential. The value of seconds of scarce and valuable stamps may increase more rapidly than premium examples of the same stamps; in other words, they may prove to be better investments! How, one might ask, could the author make such an apparently insane hypothesis? I'll illustrate my point with an example:

    Felix Unger, snobby stamp collector, has $3,000 to invest. He purchases a very nice example of a stamp with a catalogue value of $4,000 (paying 75% of catalogue value), at Royal Hindquarters Stamp Auctions.

    His apartment-mate, Oscar Madison, the stamp slob, also has $3,000 hanging around. His dealer-pal, Rip, sells him six VF-appearing but slightly defective examples of the same stamp that Felix bought, for $480 each (12% of Cat. value), and then Oscar uses the remaining $120 in change to take Rip out to a game.

    Five years later, the stamp's catalogue value has doubled, to $8,000. Felix and Oscar both decide to sell, because they need the money for alimony.

    Since even fewer people can now afford Felix's premium quality stamp than could afford it 5 years ago, he sells it though Royal Hindquarters for 70% of catalogue value, minus commission (about 10%), realizing $ 5,040 ($8,000 CV X 70% = $5,600 -$560= $ 5,040).

    Since the increased catalogue value has made the premium quality stamp less attainable, demand for the "second" has risen faster. Oscar dribbles out his six seconds via Ebay at 13% to 17% of catalogue value apiece, averaging 15%, minus Ebay's commission and the cost of lazy Oscar's labor in typing the things up and mailing them- say, 10% commission total. His final take is $ 6,600 [15% X Total Cat. Value of $ 48,000 = $ 7,200 - 10% commission= $6,480 + $120 in change from orig. purchase, used to take dealer-friend to game]. Oscar's got more money in his pocket than Felix, can annoy Felix with an "I told you so", and Rip is indebted to him for life.

    • Appendix B- Suggested Supplies and Resources for the Philatelic Investor

      • Supplies:

    -stamp tongs

    -magnifying glass

    -ultraviolet lamp

    -watermark fluid and a basin

    -mounts/approval cards


      • Publications/Journals:

    -Scott Catalogues (necessary for classification; local libraries have recent editions, so it's not nec. to buy a set every year)

    -Foreign Stamp Catalogues - these often list varieties that Scott omits; also some (notably Michel), contain valuable info. re: printing quantities

    -LINN'S STAMP NEWS- the largest stamp newspaper in the U.S.; published weekly, and well worth the subscription price; some libraries may carry it

    • Other Resources

    -Local stamp clubs

    -the American Philatelic Society- all advanced collectors should join; members receive the APS monthly magazine- AMERICAN PHILATELIST- and it helps one's reputation to be an APS member in good standing; APS has a disciplinary committee, and if a member cheats someone, the victim can complain to the APS, which can then suspend or expel the offender, if culpable

    -Specialty societies/organizations- if one decides to concentrate on a particular country or area, it may be worth joining the organization of collectors which collect that particular area, if one exists

    -Ebay/ various online stamp auctions

    -Philatelic museums and libraries

    - Expertization/Authentication Services - for a fee, these issue opinion certificates on rare stamps; a cert. is well worth obtaining if a stamp which one is considering purchasing a valuable stamp about which there is any doubt as to authenticity; the Philatelic Foundation (PF), Professional Stamp Experts (PSE), and the APS are the most prominent services in the U.S.; there are many other expert svcs. internationally; some have areas of specialization, and are better at their chosen areas than others; when purchasing a questionable stamp at auction, request an "extension of the return privilege" for the purposes of getting the stamp expertized- most auctions grant this privilege in their terms, and will also refund the cost of the certificate plus all postage and insurance costs in the event of a negative opinion;