Saturday, March 17, 2012

Collecting stamps just got very interesting

It looks like postage rates are about to increase really quite substantially, with 2nd Class rumoured to go from 36p to 55p and 1st Class from 46p to goodness knows what. A similar percentage increase would take it to around 70p.

This got me thinking. For over 20 years now it's been possible to buy stamps with a 1st or 2nd indicator rather than a specific stated value figure. In 1990 you could have bought a 1st Class stamp for 20p. If you still had it, it could be used to pay the current 46p First Class rate. That's something like a 4% pa increase. In other words, you would have had to get 4% interest each year on a 20p investment to have 46p now.

That's neither one thing nor another, I suppose, and, in fact, quite a few of those 1990 20p stamps could be worth considerably more - more like £5 if you have a certain type that wasn't particularly uncommon and lots more if you happened to have one of the rarer types. But that's another story. Let's look at what's happened more recently: you may have bought one for 30p in 2005. Now that has increased in value by a more respectable 7½% pa.

Even more recently, a 2008 1st Class would have cost you 36p and that has increased by a quite decent 9% pa. Not many investments that could be guaranteed not to lose their value, and have a reasonable market for actually selling in, have done that over this period.

"But I used the ones I bought", you say, reasonably enough, "So what's the point?" 

Well, if you buy a 1st Class stamp now for 46p and in a month or so you can use it for 70p's worth of postage then you could get an absolutely massive return on your money. Even if you don't see people rushing to buy stamps from you in a few weeks at 70p, they might be more interested in ordering a few if you charged, say, 60p. Now that's a fine 14% discount for them and an even finer 35% or so return for you. In a few weeks!

OK, we don't know for sure that the rate hike will be that big and there is, I suppose, a chance that Royal Mail might decide not to permit old NVI stamps (No Value Indicators) to be used after the date of the increase. That would be surprising and go against the whole concept of the NVIs issued to date and it would also require the issue of a brand new different stamp that we could use. I don't see that happening - at least not in the short term.

So, go buy £1000 worth of 1st or 2nd Class stamps. If you're likely to use them anyway over the next year you'll be getting £1500's worth on my estimates. If you only use one or two at Christmas and people's birthdays then sell them to someone who does use lots. Or hang on for an even greater return! But be quick - although, as the chart illustrates, prices have risen faster than RPI inflation generally, so they may just represent a pretty decent longer term investment too.

I guess I have to conclude by saying that I have no knowledge of what the new price may be, or even whether it will go up at all. It may even go down. It's just a thought. Quite a good one, possibly.

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