Alternative investments are becoming more mainstream, helped by more transparent indices and reporting, and the internet opening up auctions and information to the world. At the time of writing the Knight Frank Luxury Investment Index (KFLII), which tracks the performance of a theoretical basket of nine luxury assets, has risen 174%, with stamps and coins proving to be less volatile than the index as a whole over the ten-year period.
The world-record price for a stamp at auction was broken in 2014 with the sale of the British Guiana 1c black on magenta for $9.48m, while the world record price for a coin was set in January 2013 when a 1794 ‘flowing hair’ silver dollar sold for more than $10m. The record price for a British coin was set in May 2014 with the sale of a rare Edward VIII ‘proof’ gold sovereign [pictured] for £516,000.
Investment-grade stamps and coins have a history of stable growth behind them, and the Coutts Luxury Index found that since 2005 they have doubled in value. They are also largely unaffected by swings in other markets, being driven by the needs of collectors rather than the ‘greed’ of investors – and they are outside the banking system.
Rare stamps and coins are just right for those seeking to own a tangible slice of history with a good chance of long-term capital growth
Further corroboration of market strength comes in the form of Stanley Gibbons’ indices, listed on the Bloomberg Professional Service. The Stanley Gibbons Rare Coin Index GB200 (STGIRCIX) tracks the price of 200 investment-grade British coins based on global auction prices listed in the independent Spink Coins of England and the United Kingdom catalogue. The Index has shown a 12.75% compound annual growth rate over the past ten years. The Stanley Gibbons GB250 rare stamp index (STGIGB30) has shown annual compound growth of 11.43% since 2004.
As with any market there are important things to consider when investing. Rarity and uniqueness is crucial, as is the condition of the item and its authenticity. Seek items with documented history and provenance, and remember a certificate is only as good as the body issuing it. Also, only invest in areas where there are a healthy number of collectors, as collectors drive prices. Finally, price is key, and the classic value-investment principle applies here – seek to buy at below fair value.
The key risk for investors in this market is trying to go it alone. Where there is money to be made, you will find fakes – not just through obvious forgery, but by ‘over-grading’ a coin or mis-stating the condition of a stamp. Buy through reputable dealers and auction houses.
Investors seeking high-risk, fast returns and the thrill of dynamic stock-picking and trading should steer clear of rare stamps and coins. But it might be just right for those seeking to own a tangible slice of history with a good chance of long-term capital growth.
For more information: stanleygibbons.com
