The Economics of Stamp Collecting

Maybe you had a parent or grandparent who collected stamps or taught you about philately, the term for stamp collecting.

Stamp collecting began as a hobby shortly after the first postage stamp was issued in the United States in 1847. As stamps developed different values, the colorful squares from different locations like Hawaii and Madagascar were bought and sold for their collectible value.

Interest in stamp collecting has declined in popularity in recent years. Today, philatelists are largely made up of baby boomers and investors. Retirees may have more time to devote to the hobby, but they may be reticent to invest in the most expensive, high-end stamps that attract investors.

Learn more how investors approach buying stamps for their portfolio, how the economics of philately works, and more about current trends in stamp prices.

Is Stamp Collecting a Losing Proposition?

In 1988, the American Philatelist Society had 57,815 members, according to the organization’s website. Today, it has less than half as many. People may be losing interest in stamp collecting for a number of reasons, including the fact that the value of many stamps are declining.

The rise of more efficient research tools like the internet has improved transparency surrounding buying and selling stamps, and has actually led to their devaluing. That’s in part because collectors discovered that many stamps weren’t as rare as originally thought.

Several factors go into stamp valuation. They include the stamp’s image, its edges or perforations, the original denomination, the country of origin, and the history or backstory of the stamp. If a stamp has errors from printing, it may actually be more valuable because they were taken out of circulation, so they are more rare.

Older stamps may be more valuable if they are used, attached to an envelope with a special cancellation. Typically for a used stamp, the lighter the cancellation mark, the better.

Long-Term Returns

The depressed price of collector stamps may be viewed by some as a buying opportunity for long-term returns. However, most hobbyists collect stamps for the love of storytelling and passion for the history behind the stamps.

One study published in the Journal of Financial Economics found that British collectible stamps from 1900 to 2008 had returns of 7.0% nominally, and 2.9% in real terms. These returns are generally higher than the average returns on bonds, but lower than returns on equities. It’s more on par with returns found with art. More rare and expensive stamps tend to yield greater returns for investors.

Stamps can be an excellent way to diversify an investment portfolio, but they are not a replacement for more traditional investments like the stock market or real estate to help you meet your financial goals.

Stamps are highly illiquid, meaning that they take time to convert into cash. That’s because if you want to sell a stamp, you may have to wait months or years before finding an interested buyer, depending on the demand for the particular stamp. Stamps are physical investments. You must store them properly or they can lose value.

Pandemic Resurgence in Stamp Collecting

Many dealers reported a resurgence in stamp collecting after the global COVID-19 pandemic began in 2020. Shuttered in their homes, people had more time to devote to their hobby.

For investing purposes, the value of stamps depends on demand, trends, origin, and condition of a stamp. Unused stamps are more valuable than used ones. However, if a stamp is very rare, it could be investment-grade even if its condition is less than perfect.

The Bottom Line

If you’re interested in investing in stamps, work with a reputable dealer while being aware of trends that could change a stamp’s value. Philately clubs also may include investors who may act as mentors. Keep in mind the fundamentals of what affects the value of a stamp, from its image to its perforation.

Be aware that while these assets have fairly low volatility and tend to steadily increase in value, they can also decline in value depending on demand trends.