STICK TO THE BEST STAMPS AND YOU COULD POST GAINS IN A BUYER'S MARKET
By Holly Wheelwright

(MONEY Magazine) – As investments go, rare stamps have hardly been on a roll. Their crash occurred back in 1983, and they are only now emerging from the doldrums. Moreover, stamp prices may not repeat the run-up of the early '80s without a new surge of inflation. Since that is viewed as unlikely, now is probably a lousy time to get into stamps, right? Not necessarily. There are at least three reasons why stamps may currently be a good buy. For one thing, they have a surprisingly strong track record. The New York City investment banking firm Salomon Bros., which reports on stamp values each summer, stated in its latest survey that they achieved a 13.6% annualized return during the previous 15 years compared with 11.9% for gold and only 8.6% for stocks (and that was pre-crash). Second, compared with most collectibles, stamps are fairly liquid, with at least a million serious collectors in this country. Third, and most important, demographic trends are helping to create a buyer's market. Historically, people collect stamps either as children, when they peel the canceled ones from their parents' mail, or in their middle years, when they get intrigued by the pricier, uncanceled varieties.

''The maturing baby boomers are just reaching the age when they will start doing some real collecting,'' predicts John Dunn of the Philatelic Foundation in New York City. Adds Norman Godwin, chairman of Financial Advisory Philatelic Group Inc. of Kansas City, which assembles stamp portfolios for brokers and financial planners: ''If you buy rare stamps in this deflationary ( market, in 10 years you have a good chance of making a killing.'' Like a stamp, however, your success will depend on stick-to-itiveness. Markups are high -- 20% or more -- so you may have to hold your stamps for years just to break even. Thus you could buy a $1,000 stamp and get back only $800 if you resell it to a dealer the next day. Prices are volatile too. The popular 1930 Graf Zeppelin (see the photo at right) soared from $1,300 to $10,000 in the four years before the collectible crash of '83 in which it flamed out to $1,500. ''The last guy out gets stuck holding the bag,'' warns Richard Sine of Scott Publishing, the leading recorder of stamp prices. That's why the experts caution against putting all your eggs in one stamp album. Some suggest a 10% cap on the portion of assets you keep in stamps or, for that matter, gold, high-grade antiques and similar items. Others go even further. ''Don't use anything but your hobby money on stamps,'' says Elliot Farr, a broker and investment counselor in Philadelphia. Ideally, those who do choose to invest should count on spending at least $1,500 a year to get both quality and diversity. ''Start with two or three stamps,'' counsels Irving Koslow of Stampazine dealers and auctioneers in New York City. ''Then buy a few more each year to dollar-cost average your collection.'' Remember also that patriotism pays. ''Stamps do best in their country of origin,'' says the Philatelic Foundation's Dunn, ''but with U.S. stamps, you get the added bonus of eager buyers abroad.'' Since most post- World War II American issues have been too large to be valuable, choose the classics issued between 1847 -- when the first U.S. stamp came out -- and 1900. Some 20th-century exceptions: the early airmail stamps from the late teens and the busily traded Zeppelins from the 1930s. The 1847 U.S. No. 1 5 cents stamp is a great collection starter. ''It's not scarce, but it has shown steady appreciation over the long haul,'' says Stampazine's Koslow. You can get one in ''very fine'' condition for between $400 and $800. Other issues that have done well: stamps commemorating the Trans-Mississippi Exposition of 1898 (the example on page 31 is considered among the most beautiful of U.S. stamps) and those from 1893 chronicling the life of Christopher Columbus. Stone, of Stamp Portfolios, is also high on stamp proofs, made by printers in the 19th century when the government farmed out production. Though rarer than stamps, proofs cost less. Stamps are notoriously fragile, so investors should be especially mindful of condition. The specimen should not be faded or damaged, should be well centered between the perforations and, of course, be authentic. Novices ought to seek a trustworthy source, preferably a member of the American Association of Stamp Dealers. You can check prices against the Scott United States Specialized Catalogue (Scott Publishing, $20). A reputable dealer will guarantee you a refund if it turns out later that your stamp is not genuine. To check its authenticity, send it -- via registered, insured mail -- to a so- called expertizing organization such as the Philatelic Foundation (270 Madison Ave., New York, N.Y. 10016) or the American Philatelic Expertizing Service (Box 8000, State College, Pa. 16803). Get in touch with the firm first to check on the fee -- which can range up to 3.5% of the stamp's value. To educate yourself and become au courant with the market, you might subscribe to Scott's Stamp Monthly (P.O. Box 828, Sidney, Ohio, 45365; $18 a year) or a related weekly newspaper, Linn's Stamp News (P.O. Box 29, Sidney, Ohio, 45365; $25 a year). Then, with a little caution, good judgment and luck, your stamp collection could post a solid gain.