'Post'ing Profits

Chandralekha Mukerji and Rahul Oberoi         Print Edition: May 2011

Do not be surprised if your financial adviser some day suggests to you to pick up a few stamps to diversify the investment portfolio. Investing in stamps can help you earn handsome returns in the long term. The famous Rs 10 Mahatma Gandhi stamps, issued in 1948, are a good example. A set of hundred of these stamps with the word 'service' on them were exclusively printed by the postal department for the then Governor-General of India, C Rajagopalachari, for his official usage.

A single stamp of this lot went for €38,000 (approx. Rs 24,49,000) in the David Feldman's auction sale on October 5, 2007. However, like stocks, while a few stamps give exceptional returns, there are several examples where the price has remained flat for years.

"It is difficult to predict how a stamp will perform in future. Stamps tend not to move in a linear fashion, but in 'steps', driven by the market movements. Therefore, we encourage a minimum five year holding before crystallising gains," says Keith Heddle, investment director, Stanley Gibbons, established in 1856, deals in stamps, philatelic publishing, auctioneering and manufacturing of philatelic accessories.

"The best available indicator of the rare stamp market is the Stanley Gibbons GB30 Rarities Index (listed on Bloomberg Professional), which tracks the prices of 30 classic British stamps recommended for investment. It has shown a compounded annual growth of 10% over the last 50 years and has never fallen during that time," he adds.

Rohit Prasad, a Delhi-based stamp collector says, "For a middle class person, who can afford to put some money in stamps, it would only be an alternative medium of savings and not investment. Unless you make a big-ticket investment, at least Rs 10 lakh or more, what you buy in terms of stamps may not go up in the same rate as other investment options."

Compared with developed nation like Europe and US, where investment in stamps is a recognised and well-organised channel of investment, the Indian market is still in its nascent stages. Since the percentage of people who look at it as an alternative investment channel is pretty less, the demand, and therefore value, of Indian stamps is also comparatively low.

 A to Z of stamps
A glossary to simplify the philatelic jargons for you.

ALBINO - A design impression without colour

BLIND PERFORATION - Perforation which has not been punched out.

BLOCK - Four or more unseparated stamps.

COMMEMORATIVE - A stamp issued to mark a special anniversary or event.

ERROR - A mistake in stamp design, printing or production.

FIRST DAY COVER - A cover bearing stamps postmarked on their day of issue.

IMPRINTED STAMPS - Stamps other than adhesives, printed direct on postal stationery items.

MINIATURE SHEET - A small sheet of one or several stamps, usually with a decorative margins, issued as a souvenir.

MINT - A stamp in it's original pristine state, with full gum (if so issued), when it is said to have it's 'original gum'. 'Unmounted mint' stamps have not been hinged.

PAIR - Two unseparated stamps, joined as originally issued.

ROULETTE - Stamps separated by a series of cuts instead of perforations

SE-TENANT - Stamps of different design or face value etc. joined together.

UNUSED - An uncancelled stamp, not necessarily 'mint'.

USED - A stamp which has been used and appropriately postmarked.

VARIETY - A stamp differing in some detail from the normal issue.

Source: www.stanleygibbons.com
"A complete sixty-year collection of post-independence Indian stamps will cost around Rs 2-2.5 lakh, which is cheap compared to other countries," says Prasad. However, the demand for Indian stamps have been rising from the past two-three years. So, it might be the right time to park some funds here before prices go beyond your reach.

WHAT EXACTLY IS PHILATELY?

Normally, the first image that forms in your mind when you hear 'philately' is huge collections of postal stamps. However, it is much more than that. Philatelic material includes, mint stamps, used stamps, unused stamps, commemorative stamps, First-Day Covers, brochure accompanying these stamps, collectors' packs, miniature sheets, stamp catalogues and other postal matter.

While definitive stamps are used for regular mailing purposes, it is commemorative stamps which collectors generally put their money in. These stamps are printed in limited quantities and one can buy them from the Philatelic Bureaux and its counters.

BUILDING A PORTFOLIO

Like any other investment, knowledge is the key to succeed in putting together a collection that would give decent financial returns in future.

Apart from theoretical awareness, it is also important that you have a genuine interest in stamps. Prasad says, "You might learn all the facts and history, but it will be your passion for stamps that will help you in the long run." For the beginner, the Internet can be a wonderful place to start reading on the subject. Since there are no marked 'shops' selling rare stamps, consider joining philatelic clubs and associations.

"In India, you would not find professionals to manage your portfolio. Get in touch with local philatelists who can guide you in making a collection as per your interest. Finding stamp enthusiasts outside India and making them your penfriends in another old but popular way to start," says Prasad.

Stamps can be collected on the basis of time periods (year-wise), countries they belong to or according to a particular theme such as flowers, birds, monuments, armed forces stamps, etc. To make it easier and attractive, many philatelists, take it as an investment option, would advice you a thematic collection. But Prasad recommends otherwise.

"Thematic collections have not done well in terms of pricing. A collection of random stamps won't fetch you any money and in a thematic collection, most novice, tend to end up collecting a lot of junk. To get valuation you need to have a complete set," he says.

To get the best deals, it is important that you build your collection over time. "If you are willing to pay you can make a collection within a few days but to get good bargains, you should phase out the process," says Prasad. Spend time hunting through stamp pages, albums, network with all kinds of stamp dealers and collectors, attend philatelic society meetings and events and you will definitely find the best deals to complete a collection at a lesser price.

Also, it is important that you build a balanced portfolio. Don't put all your funds in one stamp or of a single type. If you have a portfolio of rare stamps, Heddle recommends holding on to it for a few years to maximise the returns as trading volumes are low in case of rare items.

ASSESSING ITS WORTH

A rough estimate of the market value of a stamp can be had by using a price catalogue such as the annual Indian publication from Kolkata, Phila India or you can go to Allworldstamps.com, an online stamp catalogue to search details of stamps from various countries all over the world. You can even find information about different dealers here. These price catalogues come in a variety of formats from simplified to specialised.

WHEN BUYING A STAMP

It is very difficult to assess authenticity and condition from a picture, so it is important that you physically see the stamp before you purchase it.

If you are to buy stamps online, make sure you buy it from a seller you can trust. Since the seller won't have a license to prove his authenticity, ask specific questions such as - How much experience do they have in the market? What assurances do they provide and how good is their trading history? How do they guarantee the authenticity for their stamps? etc. to avoid making bad decisions.
Although a catalogue will give you an idea of the price, it is not adequate for assessing whether a stamp is of investment grade or not. The rule of demand and supply applies to the stamp market as well.

The condition of the stamp also plays a vital role in its valuation. Even though catalogues specifically mention that the price quotes are for stamps in 'fine' condition, many make the mistake of pricing them strictly on the basis of this document. If you find a stamp in better than 'fine' condition, you might have to pay a higher price, while the price for a similar stamp in poor condition will be substantially lower.

"Every single feature of a stamp needs to be considered separately before a judgment on its value can be passed. However, there are some consistent factors such as the condition of the gum, colour of the stamp, margins, perforation and the quality of cancellation, which fall under essential considerations before estimating its value. Ultimately, rarity and number of examples available will have the biggest bearing on the price," says Heddle of Stanley Gibbons. So, if you are lucky to acquire one of those uncommon tickets of which only handful of examples are known to exist, you can easily expect to receive a small fortune for it. But be careful when picking the rare material as it is easy for a novice to misidentify a stamp.

A subtle difference in colour could mean you have a rare 'error of colour' thus elevating an ordinary stamp to something extraordinary or it could be just a poor quality faded stamp which is actually of lower value. Also, many flaws are not visible to the naked eye and certain characteristics such as the quality of the cancellation can only be judged by an expert who has vast experience of handling stamps. "You should take an expert's opinion before you make any expensive purchase," says Heddle.

 PRIZED COLLECTION

The world's most expensive and rarest stamp, 'penny magentas', issued in 1856 was last bought for $935,000 in 1980.After that, it is believed to be locked away in a bank vault while its owner was in prison.

The costliest Indian stamp is the four anna inverted head litho stamp, where the queen's head appeared inverted. It is this printing error which makes it a unique example and worth around Rs 1 crore.

The first Indian stamp called 'Scinde Dawk', a small copper token valued at 2 annas , was generally the medium of payment for postage. Today, the red stamp will cost you something between Rs 15-20 lakh.

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