Rare stamps are considered to be one of the top alternative investment ideas or tangible investments. Tangible simply because you can touch them, carry them and store them to your liking. And alternative- well just because they are different. Unlike investing in the stock market, rare stamp investing is an entirely different world of buying and selling and one that is not tread by many. Though not completely insignificant, the rare stamp investor’s world is much smaller than mainstream financial markets and therefore requires a little bit more work on the part of the investor.

A representative from Stanley & Gibbons, a respected organization in the rare stamp industry, noted that about $1 billion is traded yearly for this genre of investing. And along with that figure, there are roughly 50 million or so collectors.

Investing in stamps or philatelic investing is different from stamp collecting in that its primary motive is financial. It may also be considered passive income. Stamp investors do not necessarily have to like stamps or enjoy collecting them, they simply accumulate and hold on to them as they would with any other business investment and then sell when the selling is good.

How To Determine If Investing Is Right For You

Well, like with any business venture rare stamp investing carries it’s share of risks. Some things that can help you determine whether or not it is indeed an opportunity for you are as follows:

1. Do you already have your hands in a few investment opportunities?

It is not recommended to put your whole life savings into stamp collecting or investing. Though growing and steadily evolving, stamp investing is still small potatoes compared to other types of more established investment opportunities. For this reason it is not smart to put all of your eggs into this one alternative basket. Stamp investing may be attractive to you if you already have other engagements that are profitable and progressing well. It is actually recommended by Stanley and Gibbons that stamp investing should fall at only about 10% of your overall investments.

2. Do you have time to learn the ropes? Do you have a person in mind to act as a mentor for you?

Stamp collecting and investing requires a significant amount of know-how to make the right decisions. You want to ensure that what you are buying is worth the investment (that is, whether or not it is at the price that it should be, if it is real or counterfeit etc) as well as where to buy an item from-personal dealer, auction or internet.

One of the biggest pitfalls of new stamp investors is simply buying the wrong stamps. You need to know what to look for and where to look. Having a mentor or a person on your side can do you a lot of good in this case. And of course if you don’t know of anyone personally you will likely have to pay for this service. If not you can easily fall victim to fraud if you don’t know what to look for in the actual product, and you may not be able to tell a good buy or investment from a poor one. For instance, something may be very old and genuine, but possibly not very rare at all so therefore it is not a good investment. This is where expert opinion is a must.

3. Overall, are you comfortable with the risks associated with it?

As mentioned earlier every business opportunity comes with its share of risks. Some specific risks for stamp investing are the uncertainty of the world of stamp collecting and investing. It is not certain where this type of investment will go because of the lack of data available regarding it. There is not a lot of research available either. Likewise, stamp price indexes and other developments are fairly new.

Also it is not as easily transferable as other valuable items like gold and silver. And it may take a while to find a buyer. Also this specific type of investment has a lot to do with the culture and society of the buyer. Affluent societies with a large middle class and people comfortable with dabbing into this world are where investing is profitable. If external factors affect this, such as war or other financial crises then you may lose a sizable amount of your investment, or it may take years for the prices of those items to return to how they once were.

Advantages of Stamp Investments

So with all this said, it is important to also not forget about the many advantages of stamp investing. Along with being an alternative form of investment, stamp investing also provides diversification in your portfolio. This means that stamps are uncorrelated or unaffected by the things that affect traditional investments. Also there are only a limited amount of rare stamps to collect and own. They cannot simply be duplicated or affected by supply manipulation. Also they are a very tangible asset which the owner can hold on to, making them more secure than other investments of which the investor has little control regarding its regulation and performance.

So from this you can clearly see that stamp investing does come with its share of advantages and disadvantages. But overall the advantages seem to have the upper hand for the right individual. The key is proper knowledge beforehand and the patience to wait it through.

Lisa Patterson is an investment consultant. She enjoys finding innovative ways to add to her own portfolio and her articles focus on strategies that require less initial outlay.