Stamps could be a disorderly market: Because stamps have no intrinsic value other than their face value, which is usually quite negligible, there is a risk in an economic downturn of having a commodity for which there is no buyer. This is mentioned as it is a fear of investors, although it has never actually happened. During the Great Depression of 1929-39, stamps lost a percentage of their value, but never reached the depths of common stocks. A their nadir, most stamps sold for about 65 percent of the pre-Depression price, compared with the Dow Jones average reaching about 10 percent of its pre-Depression price. So while it may seem that stamps might be unmarketable in a depression, the one historical test indicated that virtually everything was unmarketable in the Depression, and stamps were better than nearly all conventional investment items.
Stamp investing is not for everyone: It is not for older people who need dividend income to supplement social security and pension income. Stamps are not a good short-term investment, either. The spread between what you buy an item for and what the same dealer will pay you for that item is high, usually at least 20 percent, and often quite a bit more. But have you checked stock-brokers' fees for small share trades of a few hundred dollars? And that is the level at which most stamps are traded. Stamps are still an old-fashioned hobby business, and though this is slowly changing, dealers still work on the old, low-volume, high-markup principle so prevalent in the hobby world. True, too, is the fact that each stamp must be graded individually and this is a time-consuming process.
Right now a plan is germinating in a number of people's minds for a closed-end mutual fund that would invest in stamps. Basically, the fund would be capitalized by issuing shares, which would then be publicly traded, based on the value of the stamps that are owned. An amount of trading would be done by the fund, of course, so as to liquidate items that have already made their upward move, and replace them with stamps that are so poised. The fund could function as its own sales operator, buying and selling directly, and so could lower its purchasing and liquidation expenses. This idea has seen discussion over the last couple of years, and might soon become a reality.
People who have made large profits in stamps share several distinctive traits. By and large, they are people who have maintained modest collections throughout their lifetime and who, at about the age of forty or fifty, because of rising income and declining real expenses, begin to have more money (and time) to put into their hobby. They usually buy stamps primarily as a hobbyist, but they are generally optimistic about stamps as an investment. They plan to hold their stamps for at least ten years.