Experts are divided on whether stamps should be viewed as a viable investment, writes Laura Slattery.

A US postage stamp showing a Curtiss JN-4 aircraft, or Jenny, cost 24 cents when it was issued in 1918. But about 100 of these airmail stamps had one curious feature: the aircraft was accidentally printed upside down, as if the pilot was attempting some kind of showy aerobatic move.

In 1918, a sheet of "inverted Jenny" stamps was sold by the collector who stumbled across them for $15,000.

Today, a single inverted Jenny will sell for $500,000 (€394,000). In recent years, rare stamps such as these have been known to double in value each time they have changed hands.

Philately, the study of the design, production and use of postage stamps, is almost as old as the Penny Black itself. The world's first adhesive postage stamp was issued in Britain in 1840, while Stanley Gibbons, the market leader in rare stamp investment, was founded in 1856.

The company, which this year celebrates its 150th anniversary, advertises stamps as the world's most valuable commodity when measured by weight.

Stamps, it claims, are a viable alternative investment even for non-collectors with no prior knowledge of philately.

Investment in stamps is a sophisticated business these days, with indices such as the SG 100 Stamp Price Index measuring the performance of the most frequently traded items across the world and the GB Rarities Index tracking the market for the scarcest British stamps.

The former grew 73.5 per cent between 2000 and 2006, while the 30 rare stamps that form the latter index have grown 126 per cent since 1998, recording average annual growth of 10.8 per cent over that period.

The performance has increased demand for rare stamps from investors looking to diversify their wealth, according to Geoff Anandappa, an investment adviser at Stanley Gibbons.

While demand has increased, the supply of investment-grade stamps has decreased over time due to damage and donations to museums.

Stanley Gibbons now offers a guaranteed minimum return contract with minimum returns of 4-6 per cent over investment terms of up to 10 years.

"We are trying to encourage non-collectors to invest in stamps as an alternative investment," says Anandappa.

"To a non-collector, it can be a little strange that people are willing to invest thousands of pounds in a piece of paper, so the minimum guarantee is there to give them confidence that they will get some return."

It also has a portfolio option for investors who want the flexibility to buy and sell their philatelic assets when they choose.

As thumb-sized pieces of paper tend to be fragile, Stanley Gibbons will store the stamps on behalf of investors, although collectors, who do it for love not money, tend to want to keep their assets close, according to Anandappa.

"I collect early letters and I want to be able to access my collection," he says.

With a minimum sum of £5,000 (€7,442) required, investing in stamps at this level is more of a serious business than an innocent hobby.

"The items we invest in are worth £1,000 or more. To have a reasonably balanced investment, we say you should have at least five stamps in your portfolio," Anandappa says.

The average investment is actually much higher than £5,000, with many people stumping up more than £20,000. But rather than buying a higher number of stamps, they increase the quality of the stamps in their portfolio.

"The value of a stamp is determined by its rarity, its condition and finally the desirability. Some items are desirable to collectors but are not particularly rare," Anandappa explains.

"Condition is probably the most important factor. The early stamps are more than 150 years old and their condition has often deteriorated," he adds.

"If it is an unused original, the gum needs to still be on the back, the perforations around the stamp need to be perfect and it needs to have retained its colour. If it is a used stamp, the price will be higher if there is a clear post mark."

Paradoxically, while the perfect condition of a rare stamp might guarantee a good price, imperfections are also the stock and trade of the stamp investment world.

It's not just upside-down printing - which made the inverted Jenny so valuable - that excites stamp collectors. Stanley Gibbons describes printing flaws as "fortuitous blemishes".

Philatelists thrive on variations such as different kinds of paper, watermarks, colour shades and perforations, and they check with postal authorities to see if these variations were intentional. Stamps where one of the letters or colours are missing are highly collectible, as are "imperforates", or stamps printed and issued without perforations.

The mass production of stamps today means that such errors are really the only modern stamps that collectors crave.

In Ireland, the highest capital appreciation has been from British stamps overprinted for use in Ireland in the 1920s, with the most valuable ones dating from 1922, the first year of Irish independence.

"They are going up by a substantial amount and will probably never lose their value," says Eoin Boyle, a stamp dealer who runs Irelandstamps.com.

But Boyle says he doesn't encourage people to view stamps as an investment in the same way that they would view art or houses.

"Stamps have gone in and out of fashion as an investment. There was a big bubble in the late 1970s and early 1980s that went spectacularly belly-up and left a sour taste," he says.

The trade is not without its problems. Last May, a stamp investment fraud in Spain was uncovered and there are now court cases pending. Shares in the publicly-quoted Stanley Gibbons took a temporary nosedive as a result, even though the fraud was unrelated to the company.

"I think most people who are buying stamps now are collectors," says Boyle.

"Having said that, there has been a nice bounce and the rarest of stamps are going up quite dramatically."

Portfolios such as those offered by reputable companies like Stanley Gibbons will have a reasonable quality and chance of growth, he says.

"It's better than leaving your money in the bank, put it that way. But like all investments, there is a risk."

Boyle's caution is echoed by Pádraig O'Shea of Cork dealer Raven Stamps, who does not encourage people with no interest in philately to buy stamps for investment purposes.

"You could be sold down the river by someone who isn't very ethical about their business and you wouldn't even know," says O'Shea.

In Ireland, agents and dealers belong to the Irish Philatelic Trade Association (Ipta) and, "generally speaking, everyone would give good advice", according to Boyle.

Every collector is interested in the investment returns, O'Shea believes.

"They might not always say it, but they do want to know how much their collection is worth."

But the joy of collecting means that collections are often not sold until after the collector has died, O'Shea adds.

For sceptical relatives who never showed an interest in what they believed to be the eccentric stamp collecting habits of their loved ones, a portfolio of little pieces of carefully handled paper can form a surprisingly valuable part of their inheritance.