BUYING INVESTMENT GRADE STAMPS
While we have been stressing the investment characteristics
of specific stamps and how they retain and build value, there are two critical factors
in that equation, the quality of the item and its purchase price. Quality or grading can be assured to a great
extent by getting a certification of the item.
This will cost from $20 upwards, and is as close to a guarantee of value
as you can get. It also adds to the
value of the item because it gives any buyer not knowledgeable in stamps the
assurance that he has a defense against a knowledgeable buyer who wants to talk
down an item. Note that when buying an
item at auction, you can require the auction house to submit the item to
certification, at your expense, before you take delivery thereby sparing you
from a dispute after the fact. While
many stamps are self-evident as to quality, things such as hidden defects,
repairs, and re-gumming will occur and not be included in the description of
the item and they will become an issue.
With valuable stamps such factors are common but need not be a reason
not to buy the item, they are mainly reasons why the purchase price should be
greatly reduced. I say this because
catalog values are premised on the idea that a stamp is in very good condition
and many classic stamps are often not found in such a grade. In fact, they often sell for significant
premiums over the catalog value.
The second critical factor when buying an investment grade
stamp is the purchase price. If you
purchase a stamp from a dealer, you will be paying the retail price. This means at that moment in time, your price
will be 50% or more than its resale price at that same moment in time. Clearly this is not the way for an investor
to buy. Dealers price their stamps on
the assumption they are selling to a collector, someone who is buying a
specific stamp to fill a specific space in his album. An investment buyer is shopping for a good
investment and thus, is not married to any specific stamp. There can be exceptions to a dealer’s markup,
such as when he has a large block of an expensive stamp and will give a buyer
of such a multiple a bargain price because it would take him several years to
sell it otherwise. Also, dealers often
have need for cash and will accept offers for their higher priced items simply
because it is a quick way to raise money.
Don’t pass up the fact that a larger purchase in dollars carries its own
discount value.
The principal way an investor should buy stamps is at
auction. Here he has some protection in
that if the item is not accurately described, the auction is obligated to take
the item back. The main reason for
auction buying, however, is that most of the bidders at auction are dealers and
they can only bid up to where they can make a decent profit on the item’s
resale. Hence, you need only go one bid
higher and thereby pay the wholesale price rather than retail. Auction bidding procedures and strategies are
a topic in itself, so I will not deal with it here. It is, however, the most
important consideration since it is the main source of a ready supply of stamps
for someone wanting to make a significant investment.