Wasting Time Online …

Home » Stamps and Coins

The fact that there are far more stamp and coin dealers thanstamp and coin brokers, that few wealthy people hold portfoliosof these collectibles, and that few hobbyists ever live longenough to get rich from their knowledge, tells us something. Ittells us that this sort of investment, one of the mostaccessible for the average person, one of the most potentiallylucrative and one of the safest, pales in comparison to mostother investments in return and is too complex for most peopleto attempt. But there seems to be widespread curiosity aboutthis fascinating topic, and as one who profited from a hobbycollection and learned much about the field, I feel qualified togive you a good introduction to collecting as an investment.

There are two ways to go about investing in collectibleportfolios

The first is to be a hobbyist yourself. You should be ready tospend a lot of hours to learn to enjoy the hobby, get involvedin clubs, study catalogs, attend exhibitions and auctions, andbe as smart as possible about your field of interest.

The second way is to make friends with an experienced collector,which you’ll have to do anyway, who can advise you on specialitems with promise or long-term security.

In the case of coin and currency collecting, the market isfairly strong in all segments of the field and trends aregenerally established and well known to collectors. So while itmay have long term growth potential than stamp collecting,windfall profits are rare. Gold and silver coins have intrinsicvalue in their metal and tend to fluctuate in price with themetal markets, which in turn vary with value of the US dollar.The Krugerrand and the Canadian Maple Leaf one-ounce coin arethe mint coins available offering substantial intrinsic value,but it is generally agreed that the bullion is a better overallinvestment. Neither the Maple Leaf nor the Krugerrand will beprized for their rarity.

Silver coins at current silver prices, using $5 US per ounce asa benchmark minimum price and $10 as a maximum, are excellentlong term bets when investing in coins for metal content. Fewbargains in vintage collectible. Coins are ever available, and agood portfolio should only be selected with the aid of aqualified counselor. Always opt for the best condition you canafford, even if it means purchasing a less-scarce coin, sincethe mint and proof coins are always in most in demand fromcollections and can be disposed of the most quickly whennecessary. For both stamps and coins, it is wise to specializein items from your country of residence. They will be the leastcost-effective to purchase, but they will always be the easiestto liquidate.

It is felt that the market for collectible paper currency willshow better growth than coin markets over the next 20 years. Asthis segment of the collectible market gains more publicexposure, catalog values are bound to rise in response, in manycases out of proportion to actual value. Paper money specialistsare hard to find and most agree that the market is so unstablethat only established issues of value are worth long-terminvestments. We advise collecting issues of substantial value,three figures and higher, which have not shown sharp increasesin book value in the last five years, and again we stresscollecting only the best condition possible. These issues shouldprovide the best overall long-term growth and best odds onsubstantial short-term gains.

Stamp collecting is a much more varied field than most amateursrealize, and for investment purposes, it is always, always bestto specialize from the start. There is no sense cluttering yourmind and your closet with facts and figures for low-valueforeign issues. They don’t pay off and take too much time andspace

The best bet is to specialize not only in your country ofresidence, but a specific aspect of that country’s history ofissue. You have a lot of choice there. Even specific decades,types of stamps (commemoratives, definitives, revenues, airmails, types of perforations, stamped envelopes, first daycovers, plate blocks, etc.) provide wide fields.

Among the best performers are classic series of definitives,commemorative issues before 1930, varieties and errors inprinting and lately revenue stamps, the types used for liquor,tobacco and other commodities and excise customs documents, aregetting rosy forecasts from experienced collectors because theycomprise the lowest-priced of the extremely rare issues. Theyare low-priced at the present time only because they are notwidely sought by collectors but since there are only so manyrare stamps to go around, anything scarce in a popular field,whether in antiques or records or stamps will eventually show abook value comparable to its scarcity. Demand on these issues isdefinitely going to increase.

Varieties of certain issues are the second-best bet forinvestment. The reason is the work involved in discovering manyof them. It is often possible to find a rare variety of a commonone cent stamp in collector’s and dealer’s penny-a-stamp boxesworth twenty to two hundred dollars, and the more you know aboutvarieties of common stamps, the more frequent these finds willbe. They don’t tend to grow in value at rapid rates, but theyprovide the best overall chance at windfall profits.

Classic stamps of values over $100, especially in superiorcondition, provide the best overall return on investment andtend to outrun inflation as a rule. The more popular the stamp,the better it will appreciate, and popularity can be determinedby comparing the catalog price to an actual selling price. Whenauction prices regularly go over catalog price, the catalogprices rise accordingly and if the cycle continues, the issuewill show excellent gains.

As a rule, items such as plate blocks, first day covers,commemoratives of recent issue (50 years or less) and souveniritems are not good investments. The visual beauty of these itemstends to artificially inflate catalog prices which in turninflates the selling price. They don’t tend to show reasonableadvances in value over the long term.

Large lots of cheaper issues can look attractive, especially atauction where their prices will seem especially attractive, butwhen you look around and understand that dealers and serioushobbyists bid fairly low for these lots, and dealers figuretheir profit margins into the buying price, you’ll realize thatthey are best left to hobbyists more interested in having funthan making money.

For the same reason, it is wise to steer clear of purchasingentire collections from former hobbyists. You’ll be paying forthe cheaper issues that you won’t easily liquidate in additionto the better issues, and that’s a headache and an unnecessaryexpense.

It is, however, wise to seek out hobby collectors who areretiring and selling their collections for income. Frequentlythey have already consulted dealers about values and prices andwill frequently offer the private individual a deal comparableto what a dealer would pay for that little bit of extra profit.

A few investment syndicates dealing in rare stamps and coinshave surfaced from time to time and provide the naive investorwith ready-made portfolio These can work out in your favor inthe long run, but the cost of marketing and acquiring the itemsmust be figured into the syndicate’s selling prices, making theoverall investment higher in proportion to real value than youcould probably make on your own.

Many more syndicates offer “collector’s items” custom-made bythe factory, including special coin mountings, metal stamp setsin gold, silver and platinum and fancy exhibition pieces thatrequire substantial investment for completion of the series.Some of these have turned put to be top performers, but manyhaven’t kept pace with inflation. It makes no sense to put moneyinto these manufactured collector’s items unless you have astrong sense of trends and collector’s demands. When in doubt,steer clear.

A good rule of thumb is that the collector, not themanufacturer, sets the true value, and predicting future valuesfor these items are too extremely risky.

Once you’ve got a good sense of market values and determiningfactors, you might want to consider speculating in new issuesfrom time to time. Certain items come out of the post officeevery few years and shoot up in value phenomenally over thefirst year or two. This usually happens because of the odditiesin printing method, limited runs, varieties or errors tooinsignificant to result in recalling the issue, or major errorsthat result in massive recall of particular issues, making thosein circulation of substantial value almost immediately. If youcan spot these as they come onto the market and investsubstantially in large numbers of the desired item, you canliterally make a killing over a two or five year period.Investment of this sort does require some skill, however,because most recent issues actually drop in value since theirface value at time of purchase is higher than their face valueafter five years of inflation, and resale at higher than face ofa common item will be virtually impossible on items less than 30years old.

When investing in either stamps or coins, a safety deposit boxis almost always a must. Stamps especially are subject to allsorts of damage from environmental changes and a stableatmosphere especially such as that in a bank vault will providethe highest degree of protection.