Navigating the World of Stamp Collecting for Investment

Were you the kid who always stole the stamps off the letters that came to your house because you were fascinated by them? This could turn into an interesting opportunity for you as an adult.

Stamps, with their timeless appeal, can present more than just a hobby. Philately, or stamp collecting, can turn out to be a lucrative alternative investment strategy!

The Basics of Stamp Collecting

The first adhesive postage stamp was issued in 1840 in England. Since then, stamps have been sold around the world to ship letters and packages. But they also have a secondary market: that of stamp collection.

There are several types of stamps you might want to collect, including commemorative, definitive, airmail, and other types. Stamps that are misprinted, like the 868 blue Benjamin Franklin 1c stamp with Z Grill, which sold for $4.4 million, have even higher values.

What Determines a Stamp’s Value

There are several factors that go into the valuation of a stamp. The first is the stamp’s image. As I mentioned, stamps that are misprinted or that have errors are often very valuable. The rareness of the stamp also affects its worth. The fewer stamps that were printed, the more sought-after they may be. Over time, too, stamps may become more rare as many are lost or damaged.

The age of the stamp may also determine its value. The older the stamp, the more valuable it is, generally. And then we have the condition of the stamp — if it’s in mint condition, it’s as new as the day it was created. Used stamps may have a lower value because they may be partially covered with a postmark or otherwise show signs of use. Stamps with clear perforations are usually sought after, and stamps with a unique story may be more valuable to other investors.

Is Stamp Collecting Still Profitable?

What was at one time a very popular hobby is now less common.  In 1988, there were 57,815 members of the American Philatelist Society, and today, that number has been slashed in half.

Among the reasons for this drop is that the value of stamps has declined. And now there’s less mystery around the value of a stamp, thanks to online research tools.  This means there are more resources to help investors determine the value of a stamp than there were decades ago.

While stamp collecting has historically been more popular in the West, now a variety of countries, including those in Asia, are getting in on the action, which brings more potential for profitability as markets are stimulated once again. The Pandemic, too, created a stir in the stamp-collecting market as people were at home looking for hobbies they could do in quarantine.

Still, stamp collecting can be a worthwhile investment if you are knowledgeable about stamps and have patience.

How Are Stamps Bought and Sold?

 You can buy stamps for your collection in several ways. 

Online platforms are a good place to start if you’re new to stamp collecting. You can find stamps and portfolios of stamps on sites like eBay and Delcampe. Be sure to only buy from verified sellers and ask for high-quality images so you can determine the condition of the stamps you purchase.

Sites like StampWorld and Stamps2Go help buyers buy and sell stamps. Just be aware that it’s difficult to verify authenticity online.

Auction houses can be a good source for high-value and rare stamps. If you’re in the market for stamps that sell for hundreds of thousands to millions of dollars, auction brands like Sotheby’s may have authenticated collections on auction.

There are also stamp-specific auction companies like Cherrystone Auctions that specialize in philately. 

A note on auction houses if you’re selling stamps: you’ll pay the auction house a commission whenever you sell stamps, so calculate that when you’re figuring out how much profit you can make.

You can also work with philatelic dealers in person, which gives you the opportunity to examine any stamps you’re interested in up close. Look for dealers registered with the American Philatelic Society.

Look for stamp exhibitions and trade shows where vendors gather to attract sellers. These are a great opportunity to see rare stamps up close, even if you’re not in the market for a $5 million stamp!

See if there’s a philatelic club in your area. Being a member can get you into special swap and sales events where you can buy and sell to other members.

You can also buy portfolios of stamps that include a handful of rare stamps that should increase in value over a period of five to 10 years. Some selling companies will refund your investment if those stamps haven’t risen in value.

Determine Your Stamp Collecting Strategy

If you’ve decided that stamp collecting for investment is right up your alley, start with a budget. Likely, you’ll start by purchasing more affordable stamps and increasing how much you spend over time as you realize profits by selling those stamps once they’ve risen in value.

Choose a theme for your stamp collection. Will you specialize in a particular country’s stamps? A period of time? Will you focus on misprints or historical events?

Make an effort to network with other collectors. You’ll learn a lot about the industry and pick up a few tricks for finding rare gems. You may also learn how to authenticate a stamp so that you don’t spend good money on a fake.

You may also want to purchase insurance for your stamp collection as its value grows.

Over time, you will get to know the market and understand when the best time to sell your stamps is to maximize your profits.

Risks and Challenges of Stamp Investing

Like any type of investment, stamp collecting is not without its risks. The first is that there are no guaranteed profits. It’s an industry that’s struggling to stay alive, and many stamps have become devalued over the years. 

It’s also a long-term game. You can’t buy a stamp today and sell it tomorrow at twice the price. It requires a great deal of patience as you collect stamps over time and wait for their values to rise.

Another risk to be aware of, especially when you’re just starting out, is the high instances of counterfeit stamps. You may fall for a fake if you don’t know how to look for signs of it being counterfeit. A general rule of thumb: if the price for a stamp is significantly lower than its listed value, it may be a fake.  A video from The Mystic Stamp Company provides even more tips for how to identify a counterfeit stamp.  

The stamp market is volatile and will change frequently. It’s up to you to stay on top of changes in the market, understand its patterns, and to know when to buy and when to sell.

If you’re looking for an interesting way to diversify your investment portfolio, consider stamp collecting. It’s a great addition to (but not a replacement for) other investments like stocks and real estate.