Investing is a tricky business; we have seen South Sea investment bubbles back in the day, tulip crazes, and more recently NASDAQ speculation; all have fallen dramatically after meteoric rises. Even gold enters this paradigm.
It would seem sensible that luxuries would suffer; in part, yes. But not entirely. Sometimes hard economic times drive down prices on mediocre items, while pushing up the high end. Money moves into safe havens.
One company that monitors collectibles recently published a report on how the prices were doing in this market; surprisingly, over a ten-year period, stamps had risen 255%, beaten only by cars as a luxury commodity. Knight Frank's Luxury Investment Index (KFLII) reports:
Continued price growth in the classic car sector and an upturn in the performance of investment-grade wines helped to boost the value of KFLII by 7% in the 12 months to the end of June 2013.
This matches the increase in the value of residential property in prime central London over the same period and is in stark contrast to the 23% fall in the price of gold since June 2012. The FTSE 100 index of UK listed equities performed slightly better, rising by 12%.
Over a 10-year period, however, KFLII (+174%), has significantly outperformed the FTSE 100 (+155%), although gold still remains the top mainstream asset performer (+273%).
Looking at the individual asset classes represented within the KFLII, there has been a wide variation in performance over the long and short term. Across every time period classic cars, according to the HAGI Top index, have shown the strongest growth, rising 21% over the past six months and a remarkable 430% over 10 years - even better than gold.
After a significant correction in 2011 and 2012 following an overheating in the market for certain wines favoured by Asian buyers, the Liv-ex100 index, which tracks the performance of investment-grade wines, has returned to growth.
The art market, by contrast, remains volatile, Although certain artists retain their cache and are achieving record results at auction, buyers are generally bidding more cautiously and selectively.
Stamps and coins have maintained their long-term growth trend and are now marketed as genuine investment asset classes. But furniture continues to lose ground as antique styles decline in popularity with homeowners.
My own thoughts to add to this are that the fall of NASDAQ after 2000, and the general volatility after 9/11 sent investors scrambling; home furnishing, gold, real estate, etc. Safe havens were hard to find. Not to say that stamps are there to replace equities and real estate, but managers are going with more than the previous figure of 5% as a guide for stamps and coins as part of the portfolio. With the Chinese driving the market, as a nation of philatelists, and the record high estimate of the upcoming one cent magenta ($10-20 million at Sothebys), there is money in stamps. Along with, of course, the pleasure of owning a part of history and art in miniature as so many of them are.
[Thanks to Mike Japp of Ango-American, a New York based company that handles stamps and other collectables, for the above information].
And they are fun! But yes, they are an investment if one gets the better stamps and sees trends - and keeps them in top condition. Some people have made fortunes in stamps, and now India is entering the market as a good country for investing, it could be another China.
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