24
Like most alternative investments,
stamps and coins have properties that
will help to fulfil a number of investment
objectives. Firstly they offer diversification
benefits – they show a low correlation to
mainstream assets such as equities and
bonds, where most investors allocate the
majority of their wealth. This means that
stamps and coins can offset losses in these
assets in sudden market crashes, as was
witnessed in the 1970s and again in 2008.
Secondly, they also show a positive correlation
with inflation – as inflation increases, so
does the value of stamps and coins, again
providing a useful hedge in any portfolio.
Third, they offer the prospect of outstanding
growth and returns in their own right –
academic research finds that stamps return
in the region of 7% per annum over the long
run and indices of investment grade coins
show growth of 12.4% over the last 10 years.
Finally, they are a non-renewable¬ asset –
that is to say that as time goes by they get
rarer as there is no prospect of new supply
coming onto the market. Therefore, if the
pool of collectors and their buying power
stays the same or increases – which it
appears to be happening as interest grows
in newly rich economies – the prices of
rare stamps and coins can only increase.
For investors who take a positive view of
this investment case, accessing the market
is still challenging. There are many pitfalls
to avoid as buying and selling the right
items at the right price is a specialist activity
that requires knowledge and experience.
However, there are adviser-brokers
and stamp and coin based investment
products on the market for those who
do not have the time or motivation to
develop their own understanding of the
sector. These products and services seem
like the swiftest and easiest way to get
into the market for retail investors.
Fantastic diversifier, no correlation to the
mainstream markets
Supply and demand equation pushes
price up
Distinguish between collecting and
investment
Invest for medium to long-term
Invest a small part of overall portfolio
Investment requires expertise
Risks include fraud or over-paying – these
can be mitigated by expertise
Risks include buyers leaving the market –
have to take a view on likelihood of this
CONCLUSIONS
APPENDIX
1. Dimson, E., Spaenjers, C., Ex post: The
Investment Performance of Collectible
Stamps. Journal of Financial Economics
(2011), doi:10.1016/j.jfineco.2010.12.005
2. Robin Duthy, Alternative Investment,
1978
3. Peter Temple, The Handbook of
Alternative Assets, 2010
4. The World Wealth Report
5. Campbell, R. A. J., Koedijk, C. G. & de
Roon, F. A., Emotional Assets. 2009
6. Fischer, B. H. & Firer, C., The risk/return
characteristics of the postage stamp
market. The Investment Analysts Journal
(1985)
7. Veld, C., Portfolio Diversification
Benefits of Investing In Stamps (2007)
8.
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