In these troubled economic times, philately will get you everywhere

The share portfolio has disintegrated, the endowment mortgage will take an extra 10 years to pay off and a recession looms.

When the conventional pillars of investment fail, what is left for the millions of Britons who find the nest eggs they have painstakingly squirrelled away fall victim to a global economic hangover?

The answer, according to advice doing the rounds in the higher echelons of international finance, is a Spain 2 Reales blue colour error, a wide-margined Penny Black or a 1972 special day issue from Tristan Da Cunha.

The obscure and arcane art of philately – stamp collecting – has emerged from the darkened studies of middle-aged men with an all-consuming passion for non-perforations and watermarks into the prosaic world of the fast buck.

Stanley Gibbons, the holder of the world's largest stock of stamps and one of the biggest dealers, announced half-year profits yesterday of £203,000, a threefold rise. Experts at the London-based company, whose catalogues are a byword for the current values of stamps of all hues and origins, said at least part of the profits leap was due to a rapid inflow of buyers to the market.

Paul Fraser, the chairman and chief executive of Stanley Gibbons, said investors disenchanted with blue-chip stocks and the seismic shocks of Enron, WorldCom and Qwest were returning to a childhood hobby. He said: "The stock market is very intangible. The realisation that even the biggest companies could be at risk sends people searching for something tangible.

"Stamp collecting provides an opportunity to get some increase in value and you can enjoy what you're collecting."

But regardless of the joys of poring over a rare over-print from tsarist Russia, the hard figures tell the story of why small squares of pretty paper have become hot property.

The value of rare stamps has increased by more than 10 per cent annually over the past five years, which compares favourably with the most generous building society interest rates of 4.65 per cent and even more starkly with the FTSE 100, down 22 per cent on a year ago.

City investment managers agreed that stamps – as well as other obscure investments from French clarets to vintage automobiles – were attracting increased interest from fund holders looking for a respectable return.

Alex Scott, a senior research analyst at Seven Investment Management, said: "You do see at times like this that alternative investment ideas come to the fore. Investors will look for other opportunities that can hold value and can mean hedge funds or even arts, antiques, collectables, whatever you want to buy."

But before cash-rich, profit-poor investors stampede to their nearest provincial stamp fair, experts in the area put a substantial wealth warning on the art of philatelic speculation.

Would-be investors need look no further than the example of Britain's Penny Black, the most famous "rare" stamp in the world. Despite the widely held perception that a Penny Black is a thing of monetary value, it was the postal workhorse of an age before faxes, e-mails and couriers. Some 68 million were printed after its inception on 6 May 1840 and a passable example picked up for about £20 is no more likely to gain value rapidly than the junk bonds of a global conglomerate fallen on hard times.

The trick, according the experts, lies in having an eye for the extraordinary minutiae of an item no more than an inch square.

Penny Blacks, unlike modern stamps, were not produced on perforated sheets and had to be cut by hand by postmasters. The imprecise hand of so many Victorian postal workers means that an example with a wide margin is worth about £500 – far more than a tightly cropped counterpart.

To complicate matters, the highest values are revealed by peering through a magnifying glass at the letters printed in the top corner – such as AA, AB, AC – indicating which of 11 printing plates was used. A fine Penny Black printed on plate 1A is worth about £220 while an identical one from plate 11 is worth £1,800.

In other words, bargains in philately come only to those prepared to invest time in gathering knowledge on the obscure, minute and barely visible.

David Crocker, auctioneer for Stanley Gibbons, said: "If I had £20,000 to invest in stamps, the first and most important piece of advice would be to get some knowledge. There is no substitute. Without it, you can't spot the bargains."

Indeed, investors who got their fingers burnt in the dot.com meltdown need look no further than philately for another example of how an overinflated and unorthodox commodity rapidly lost its value.

In 1979, investors seeking shelter from industrial unrest and a stagnant property bought heavily into stamps, creating a speculative spiral that culminated a year later with the auction of the Vaduz Collection of British and Empire rarities for what one expert still recalls as "crazy, mad, barmy prices". The following day, the market was comprehensively returned to sender as speculators realised it was overpriced and prices crashed, leaving many small investors holding worthless bits of paper.

The lesson, according to the cognoscenti, is to enjoy first and invest later. Phillips pointed out last year that most stamps, apart from the booming rarities market, were worth no more than they were in 1981.

Alex Scott said: "It is a feature of market that is in a very difficult and unpredictable cycle. But that kind of investment is not for everybody unless you have an inherent liking for the object involved."

Those heading into their lofts and dusting down childhood albums in the hope of finding a one-stamp goldmine among those they steamed off envelopes during their youth should also think again. Such was the volume of production that very few stamps after the 1960s are worth more than face value and the same applies to all but the rarest first-day covers.

Instead, collectors are heading away from individual stamps to items of philatelic interest such as correspondence from famous people (even forgeries) or original printing blocks.

POSTING HIGH VALUES AT AUCTION

1980
The famed 1856 British Guiana one-cent magenta was sold for a record $935,000 at a New York auction.

1996
A Swedish three Skilling Banco from 1855, the only one in the world, was sold for £1.3m at a Swiss auction.

1998
A rare block of 10 Penny Black stamps dating from the first day of issue in 1840 fetched £200,000 at a Stanley Gibbons auction, It was then the highest price for a single cover sold in London.

2000
One of Britain's rarest stamps, a King Edward VII 1904 6d IR Official was bought by an American collector for £80,000.

2001
A red 1861 Cape of Good Hope One Penny stamp with a printing error sold for £74,750.

ALTERNATIVE INVESTMENTS FOR HIGH-ROLLERS

Wine
Investment advisers say wine can perform much better than investments on the stock market, but it can also be a high-risk strategy. An investment period of 10 to 20 years is best and most brokers recommend a minimum investment of £3,000. It is vital to stick to the highest-quality wines, ideally classic French wine from the "first growth" red Bordeaux vineyards, including Chateaux Haut-Brion, Lafite Rothschild, Latour and Margaux. A case of 1990 Chateau Margaux that cost £400 in 1991 is now fetching about £3,300 at auction – a return of 725 per cent

Vintage cars
A 1954 Aston Martin MK1 Spyder, left, was sold for £251,000 at Christie's this week, and prices for the majority of the lots at the sale rose, with greater than expected interest from buyers. A spokeswoman for the auctioneers said: "Cars of exceptional quality or a rare history or that that have maintained their original condition are selling very well. It is definitely where people are putting their money."

Art
A Rubens masterpiece became the most expensive painting sold when it went for £49.5m in July. The Massacre Of The Innocents was sold at Sotheby's and was the first painting to top £40m in four years. It crowned a season of summer art sales in London and New York that has been more closely watched than ever, and which analysts said was reminiscent of the early 1990s when investors put money into art as recession hit the stock market.

Jewellery
A 42-year-old businessman paid nearly £10,000 – double the expected price – for a gold watch given to Richard Burton by Elizabeth Taylor on the set of Cleopatra. The watch, right, which was made by the Swiss manufacturer Patek Philippe and engraved with the words "I love you", sparked a furious bidding war. In April a 1939 platinum wristwatch also made by Patek Philippe was bought in Geneva by an anonymous buyer for £2.7m. The watch, which gives the time in 42 countries, sold for more than double the previous world record price.