I received an email from a stamp dealer wanting me to join his Internet site that talks about investing in stamps. I’m pretty skeptical, but I checked out the website anyway. I left with mixed feelings.

There was some information on the website about stamp collecting in general. Much of it was fine. I agree with many of the points that the author made.

I checked out the information on stamps that collectors should invest in. I was not impressed. A few of the stamps might have some potential. Many of the stamps touted, I see going nowhere.

One mistake this website has is listing the quantities issued of certain stamps, where the quantity issued is usually in the few hundreds or less. The author equates low quantity issued with investment potential. I firmly disagree. Low printings of stamps do not mean it’s going to go up in value. Demand is what generates value.

I’ll give you a hypothetical example (this is not a real stamp). Suppose Panama issued a revenue stamp for a potato tax. There are only 40 printed and known. How many people collect Panama? That number is probably in the hundreds, maybe a few thousand if you count casual collectors. How many of those collectors are interested in Potato tax stamps? You could count those collectors on one hand. Therefore, 40 stamps sounds really small. But if there are only 5 collectors interested in that issue, the supply is 8 times the demand. Yes, the supply is very small. The demand is even smaller.

Let me give you a real example. Everyone knows about the inverted Jenny, Scott #C3a. It’s almost 100 years old. It has a very famous story behind it. There is a lot of demand for this issue. There are only 100 copies in existence. Almost every philatelist, whether they collect US stamps or not, has heard of this stamp. Many people in the general public know about this stamp too. Ask someone if they would like to own one, the answer is, “yes!” They know it’s a rare stamp worth a lot of money. Depending on condition, copies sell from $150,000 to $500,000.

Conversely, take Scott #1610c, the $1 candleholder invert, the “CIA invert” as it is known. It too has an interesting story behind it. There are at most 100 copies, but the quantity known is slightly less than that. Copies sell for around $15,000, about one-tenth the price of #C3a.

Both stamps have approximately the same number of stamps known. Why does #1610c sell for much less? It’s all about demand.

Is #1610c undervalued? Maybe. Will it ever meet the price of a #C3a? In my opinion, no. Will it go up in value though? Maybe. If the stamp ever catches the attention of main stream collectors, like the #C3a has, then yes, I think this stamp may go up in value. Currently though, it still suffers from lack of recognition and lack of demand.

If you want to invest in stamps, my general advice to you is this. First, you need a lot of money. You need to buy stamps that sell for tens of thousands of dollars or more. This eliminates 99.99% of the people who collect stamps. Very few people have that kind of money to buy stamps. Second, you need to understand the market trends. Buying a couple of stamps and sitting on them waiting for them to increase in value is not wise. Third, you have to be in this for the long haul. There are very few cases where you could buy a stamp today and turn it around in a short period of time at a profit. In my opinion, you need to look at holding on to your stamps for 10+ years before you see a solid return on your investment.

One more thing about investing in stamps. Is the person giving you the advice about investing in stamps also the person trying to sell you those same stamps? If so, beware! I don’t want to falsely accuse anyone of being a crook. But if I told you that the $5 Columbian is a good investment (Scott #245) and I sell it to you, I’m making money from you. If the stamp goes up or down in value, that’s your problem.

There is a conflict of interest there. I’m giving you advice and trying to sell you that same thing. If I’m so sure this stamp is going to go up in value, why would I sell it to you? Why don’t I hold on to it and make all of the money? Think about it.