From the pen of Karin Iten, managing editor,

Sick of the market volatility?

I can’t say I blame you – just one glance at the JSE Alsi chart below is enough to have me running for my medicine cabinet to grab some sea-sickness pills left over from my recent trip to Greece.

Right now, the only market players who are smiling are short-term traders – as the market dips and soars they’re cashing in on the rollercoaster ride. But traditional investors are taking a beating.

The secret to protecting (and growing) your wealth... Through boom times and bust!

“Where’s the JSE heading?” you ask.

Should you prepare your portfolio for inflation or deflation?

Where will you put your money if the rand nosedives?

Here at The South African Investor we’ve got some ideas – today, I’m going to share one of our more unusual ones with you...

How the “king of hobbies” could add 10% to your investment returns year after year after year!

In South Africa, millions of rands in stamps are auctioned every year, says auction group Stephan Welz and Company.

“How lucrative is stamp investing?” you ask.

Well, while many may view this alternative investment arena as a “hobby”, investing in stamps can be an extremely lucrative investment opportunity. Astute investors who’ve uncovered this little secret have been quietly seeing large returns on their investments. Over the past 50 years, the annual return on this alternative investment has been 10%.

Don’t believe me? Consider this: Depending on their condition, a used Penny Black, for example, can sell for between R1,200 and R2,000. An unused one in top condition can fetch up to R5,000. Why so much? Because, as the world’s first official adhesive postage stamp, it’s highly sought after by collectors and investors alike. Meanwhile, the Inverted Jenny, an American 24c stamp with the aircraft printed upside down has taken to top spot of “most expensive stamp in the world” when it fetched $2.97 million at auction recently.

Three factors determine a stamp’s value

There are three things that determine a stamp’s real value: Rarity, quality and demand. Of these, the most important (by far) is demand. To invest in the very best, you must follow these three rules:

First and foremost, invest in quality – not bargains. Stamps in premium condition – which are both scarce and popular – are markedly more resistant to recession and you can sell them quickly at any time.

Secondly, always remember that nothing is more important to an investor than a stamp’s grading and condition. Knowing how to eyeball a stamp’s grade and condition is something you must learn to be able to play the game. A practised eye will save you both time and money. A grade is all about centering, cancels and gum. It describes how well the stamp’s design is centred between the perforations – both horizontally and vertically – the condition of the gum for mint stamps or the effect of the cancellation on used stamps. Like exam scores, stamps are graded from “superb” (for a perfect in every respect stamp) to “poor”. The condition of a stamp, on the other hand, describes the physical appearance of the stamp’s paper, ink and gum.

And finally, you need first-hand knowledge from a well-informed dealer on the relative scarcity of the issue and the marketplace’s demand for the stamp. This includes information on which stamps are suitable for investment and which have little prospect of major appreciation. (For more details on how to find a stamp dealer visit the official website for the South African Philatelic Association at www.stampdealers.co.za.)

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Got a flaw? You could be looking at an investment gem...

Unlike art collections, which look for the “best example or a history”, as a stamp investor you should look for an imperfection that stems from some sort of mistake. Why? Because incorrect stamps are far more rare and that makes them highly valuable.

Look out for the following three types of valuable mistakes and imperfections – although remember there’s a pecking order (some mistakes are more valuable than others).

*** Artist drawing sketch error: Look for stamps with a mistake in the details of the picture. Famous examples include an upside down Union Jack and the Red Cross Centenary stamp – which was printed without the red cross.
*** Printing error: This happens when the print run goes through twice and there are two impressions made on a single stamp. The further the distance between the two impressions, the more valuable the stamp is. Here in SA, keep you eyes peeled for Union of South Africa stamps with missing colours. These can easily fetch R6,000 to R8,000 at auction.
*** Inverted pictures: These are highly valuable. This error used to happen in the Victorian era when the frame of a sheet of stamps was passed through the wrong end before the centre was printed. The result: A sheet of stamps with an upside down centre.

If a stamp’s earned a place in the history books, it’s bound to be a good buy. For example, the Penny Black we looked at earlier. There’s also the Cape Triangular – SA’s first stamp issued in 1853 – which is famous for being the world’s first triangular stamp. It’s so famous, the stamp’s been commemorated numerous times since 1926. (Most recently in 2003, where it was redrawn to commemorate the 150th anniversary of the original stamp.)

Postage and revenue stamps are important (and valuable) parts of philately – especially stamps issued at the turn of the century. Also look out for sets of South Africa’s first self-adhesive stamps issued in 1998. This set of five stamps – featuring SA antelopes – has gained huge investment potential over the years.

Naturally, stamps featuring historical figures and events also have huge appeal in this market.

To get your hands on some great deals, it’s worth taking a look at: www.mrthematic.co.za – an online stamp shop here in South Africa.

Until next week… Here’s to your financial freedom...

Karin Iten