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STAMP INVESTING – BACKGROUND

Authored by: Richard Lehmann

Getting started in stamps as an investment is unlike the securities market, and yet, it shares enough similarities to be considered for a diversification of one's investment capital. Before getting started, it is important to differentiate stamp investing from the multiple participants who are in it as a hobby. Philately is overwhelmingly focused on these participants and looks almost with disdain on those who participate in it as investors. This is understandable if one ignores how the Internet has changed matters.

Before the Internet, information on stamps existed in thousands of specialized publications and periodicals which required years of reading and a significant allocation of personal time, which is of course exactly what a hobby is all about. Those who made stamp an investment where hobbyists with personal fortunes who decided to take their hobby to the next level. Even here, they often retained advisors to help them sort through the available supply of rarities to identify which had appreciation potential. Since such items were generally sold at auction, this venue became the equivalent of a stock exchange where knowledgeable buyers and sellers came together. The appreciation of stamps was thus dependent on how well the sale was advertised so that multiple buyers for any given item would be present. This sales process was extremely limiting in broadening the number of participants and range of offerings because of the high cost of advertising, producing and mailing a sales catalog with high quality images.

Since the Internet, the possibilities for stamp investing have changed dramatically. In terms of buying, the auction process has exploded. Not a week goes by without an auction taking place some place in the world. In fact EBay, which has become a major player in the sale of stamps, is a perpetual auction for many of its offerings, albeit few of which would qualify as investment buys. In terms of product availability, it has vastly expanded the product supply and improved price transparency, although I will have much more to say on this in future postings.

While the Internet has the potential to make the stamp market a global forum, much development work still lies ahead. As with so many things, the Internet began by doing electronically what was previously a face-to-face of hands on activity. It was only with time that books changed from being sold on line for mail delivery to being available immediately electronically via download in visual or audio form. In the same sense, the Internet offers the opportunity to change philately from largely a hobby to an investment outlet without government oversight or dependence on exogenous factors such as the economy, management performance or currency values. That said, it is not a short term investment. It is an investment in which you will be able to make rational judgments based on sound investment principles and faith that its appreciation as an investment rests not on past practices and results but rather, on growing demand driven by improving technology.

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