Tax Benefits

Philatelic Investments is the investment in collectible postage stamps for the purpose of making profit. It requires a lot of expertise and is a very risky form of investment. Hence for those interested in investing in stamps, gaining knowledge about classification, condition grading, authentication, handling and storage, the stamp market and philatelic literature is of utmost importance. Unlike the share and stock market, philatelic investments take place informally and thus it is difficult to estimate the size of this market. There is a common misconception that nobody collects stamps anymore, but in reality, more people are into collecting stamps than anything else. Investors in stamps can be thought of in three broad categories- pure investors; those who are purely interested in investments and making profit from it, stamp collectors; who collect without really thinking of the investment potential and then there is the category in between the two; those who invest to make money, but have fun doing it, even if it is at the risk of their investment objective. In 2009, an estimation suggested that there were about 48 million collectors worldwide, 18m of whom are part of the rapidly growing market in China. Indian philatelic market is also growing rapidly and it is expected to surpass Chinese markets in the next decade. Like all commodities, the value of a stamp is determined by the forces of demand and supply. These depend on a variety of factors like the number available, the condition in which it is preserved, the expectation on its future value, the place of purchase etc. These factors are summarized as follows: * Country (or area) of issuance: Most stamp collectors within any given country collect their country's stamps. Some collectors collect specific areas or regions. * Topical appeal: Many stamp collectors focus on stamps which picture particular popular topics, such as Sports, Nature, Art, Religion, Space Exploration, etc. * Perceptions of value: These refer to its current value and the expectation of its future value to increase or decrease One can buy or sell stamps informally from the internet, auctions, private sales of a collector, stamp dealers or from specialised stamp investment firms. The Internet has made collecting stamps very easy, with stamps featuring as the popular category on eBay. There are many stamp dealers all over the world. However dealers that maintain a good collection of stamps are few. Most dealers acquire stamps through private sales or auctions. Many auctions are available online as well, allowing investors to bid from all parts of the world. Stamp investment can be seen as a long term investment. It should not be considered in case you want to get returns quickly. It is said that a good stamp should be held for at least 5 years before selling. When the time comes for sale, there are specialist dealers and auctions for this as well. Advantages of philatelic investments There are many advantages of this type of investment. Firstly it is a convenient form of tangible investment because it is highly portable and easily transportable. Philatelic investment is a good portfolio diversifier; there is very little correlation between the performance of stamps and the performance of other asset classes like stocks and bonds. And hence philatelic investments allow investors to benefit from risk diversification. Another important advantage is its liquidity; there will always be a buyer for a good collectible stamp. In times of inflation, stamps by way of not being financial asset may perform much better than cash. Disadvantages of philatelic investments This investment also comes with its disadvantages. As mentioned earlier, it is a fairly risky form for someone new and it requires a lot of expertise. There is no guarantee of return on such investments. The cost of buying collectible stamps is much higher than most other forms of investment. The costs related to selling are also relatively high. Because stamps are tangible items, they may need to be insured. They are at a risk of physical damage and deterioration. Though they are liquid assets, finding a buyer may take time as there is no formal means of trading for such kind of investments. Forgery of stamps is very common and expert evaluators may charge a high fee. Stamps have little intrinsic value, unlike other alternative assets like gold or silver. The future of this form of investment is uncertain because the existence of stamps per se is questionable with the shift to electronic means of communication. Another important drawback is that unlike most other investments, stamps do not generate any interest or dividends.