Practical Advice - Common Mistakes to Avoid When Building a Stamp Collection

As a stamp dealer living in the Washington, DC area, I am frequently approached by collectors and their heirs who request that I evaluate their collections. Often, I run into collections that aren't worth very much, and have to inform the owner that he probably has a beginner's collection, and that "its sentimental value is greater than its market value." This is usually disappointing to the owner, who is sometimes baffled because he believes that the collection should be worth more, as many years of work were devoted to building it.

Stamp Collecting is not only enjoyable and educational, but offers the opportunity to build a collection which is also a valuable asset, if done properly. The main difference between a beginning stamp collector, who is usually unfamiliar with the financial side of philately, and a stampselector, is that many beginning and even intermediate collectors make fundamental mistakes when pursuing their hobby, from a financial perspective. Some of the most common mistakes are described below:

1) Buying sheets of stamps or commemorative year sets from the Postal Service- the overwhelming majority of stamps issued by the U.S.P.S. do not increase in value, except over very, very long periods of time. Most mint U.S. postage stamps issued since 1940 are considered "discount postage," and stamp dealers commonly buy these issues for 60%-80% of face value. Perhaps in another 50 years or so, as more of these stamps are used up as postage, some of them will begin to inch up in value.

2) Confusing catalog value with market value - this is a general problem in the sense that there is no substitute for familiarity with the stamp market, and that stamps of different countries or collecting areas sell for different percentages of catalog value. The most dramatic misinterpretation of catalog value, however, occurs when a beginning collector buys "packets," envelopes of cheap stamps from a dealer, and then assumes that the catalog value has some validity when it comes to evaluating these stamps. Scott assigns a "minimum catalog value" of 25c to any stamp, in order to take into account a dealer's labor in writing it up and presenting it. However, the most inexpensive, virtually worthless stamps are sold by the pound, sometimes for as little as 1/20c per stamp. Theoretically, 100,000 stamps may have a minimum Scott value of $25,000, but in reality, they may be worth only about $ 100, or less.

3) Buying commercially produced stamp, First Day Cover, or event cover collections from so-called "collector's societies"- a number of corporations fleece beginning collectors by persuading them to subscribe to these items, touting their beauty and investment potential. When the original subscriber attempts to re-sell his "heirloom collection," he invariably learns that the collection is only worth about 4% of what he paid for it.

4) Buying too many different inexpensive stamps - one of the fundamental differences between collectors and philatelic investors is that collectors usually want to fill spaces in their albums, while investors want to purchase items which increase in value and then may be easily re-sold. Often, collectors buy many different inexpensive stamps or sets of stamps, and then later find that it is very time-consuming to organize them for re-sale and that few buyers want to purchase them. This is not the same as an investor purchasing a large quantity of a single inexpensive item, because an inexpensive item, in quantity, constitutes a single lot which may be conveniently re-sold. It is much easier to sell a single thousand dollar stamp, or fifty of the same twenty dollar stamp, than it is to sell fifty different twenty dollar stamps. A stampselector should take into account the time and effort that will be involved in re-selling his stamps, both by himself and by prospective buyers, because this "convenience factor" will be an important determinant of their value.

5) Neglecting to preserve the collection- condition is a crucial factor in stamp valuation. Having evaluated many collections for which the value was tragically decimated due to improper handling or storage, I strongly recommend that all collectors learn about stamp preservation. Readers may wish to take a look at my article on the subject, "Practical Advice: Preserving Your Stamps",which appeared earlier in this blog.

There is nothing wrong with treating stamp collecting purely as a hobby, pursued solely for pleasure and with no expectation of financial reward. However, should a collector also consider himself a philatelic investor and desire that his collection increase in value as an asset, he must take into account the factors which will affect its eventual sale. The hobby and the business are related, but they are not the same.