By KEITH HEDDLE Stanley Gibbons, Jersey
How many times have you been captivated by the concept ofa quick return?
How many times have you been captivated by the concept of a quick return? Realistically, we all have – the hope of that timely investment that galvanises your fortunes almost overnight… that firmly-pocketed lottery ticket… the outsider you backed to win - and very occasionally we do win and it does come good.
Today though, your investment brief is going to be a story about a bull, a bear and a tortoise (hint: back the tortoise).
Investors in equities generally hope for a bull market, an extended period in which investment prices rise faster than their historical average as they did in the early 1990s, often as a result of an economic recovery (which looks increasingly distant for large parts of the western world!). Right now though, the bull is disappearing over the horizon. What we have currently is the exact opposite; a bear market. We are experiencing a prolonged period in which investment prices fall, accompanied by widespread pessimism! Well, there’s the bear of the story – and the current one’s a right Grizzly. The reality of the investment world (find me a financial analyst or IFA who won’t tell you this) is that most markets are fickle and cyclical and investing is a long term race.
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That’s where the tortoise comes in. We all know the fable about the tortoise and the hare, where the supposedly swift and speedy hare brags about being the fastest animal around and sure to win any race.
Challenged by the tortoise to a race the hare stops, snoozes and falls asleep – while the tortoise plods on and wins the race with slow and steady progress.
That sums up the rare stamp market; uncorrelated with other mainstream, more volatile asset classes, but showing relentless, steady growth over decades. Even in the turmoil of the recent crash the stamp market remained healthy and in fact the GB30.
Rarities Index, the Bloomberg-listed index of rare GB stamps has shown a compound growth of just short of 11% for the last 40 years. In the last few weeks two rare stamps from Mauritius realised over £1 million (each) at auction in London. That’s the sort of impressive investment performance unheard of in many other asset classes.
But don’t just rely on Stanley Gibbons to tell you that… An academic and completely independent study by Elroy Dimson
& Spaenjers in 2009 titled, ‘The Investment Performance of Collectible Stamps (1900-2008)’ concluded that stamps had, “an annualized return of 7.0% in nominal terms, or 2.9% in real terms… higher than those on bonds but below those on equities. Stamp returns are impacted by movements in the equity market, but the systematic risk of stamps remains low. Stamps partially hedge against unanticipated inflation. Estimates of average after-cost returns for individual investors show that stamps may rival equities in terms of realized performance.”
In essence: 1. British stamps showed a steady annualised return of 2.9% from 1900 to 2008 with little volatility or risk (and that’s the total universe of GB stamps, not necessarily the premium quality, investment grade items that Stanley Gibbons would select for you for investment).
2. Stamps are a good hedge against inflation.
3. Although the annualised return for equities was at 5% over the same period, once the transaction charges are taken into account, the gap narrows considerably.
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