First edition books: A novel investment?

 
Elliott Haworth
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First edition of Ayn Rand's The Fountainhead have fetched £8,540 at auction (Source: Stanley Gibbons)

It’s often said that one shouldn’t judge a book by its cover, but when it comes to investing in rare or first edition books, the old adage bears false.

Books don’t immediately jump out the page as something one might invest in; more a pleasurable escapism than a tangible asset. But rare and first edition books are a solid investment at the lower end, and a fascinating way to diversify your portfolio with a piece of history.

“In this disposable soundbyte age, things like rare books have a permanence that resonates with history and culture – there is a bit of book in everybody,” says Keith Heddle, managing director at Stanley Gibbons Investment.

The market is driven by simple supply and demand, but what makes investing in books exceptional is that the supply is finite, and demand is growing. The burgeoning middle class, especially in Asia, is accelerating demand for alternative assets: “if you’ve got a rare item, someone, somewhere will want it for a collection, or as a trophy item. There's no one off black swan event. Yes we had the crash, but since then assets have become more popular as people aim to diversify and de-risk themselves.”

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The right book, in the right condition, can offer exceptional growth, driven by a market in limited supply. Stanley Gibbons Rare Book Index, which tracks the price and demand of a selection of “rare books in excellent condition, with pristine dust jackets,” shows strong growth of 414 per cent over the last decade, with a compound annual growth rate of 8.5 per cent – outperforming both the FTSE and gold.

But which books fetch the most at auction? “It's all about rarity and condition,” says Heddle. “People tend to look at first editions – and generalising massively – particularly 20th century and before.”

As an example, an optimum condition copy of Live & Let Die by Ian Fleming, worth £2,820 in 2001, was worth £4,560 in 2009, and at last valuation in 2014, £8,060 – some 1,652 per cent over a decade.

Don’t go raiding your book shelves just yet though. Condition really is everything in the owlish world of rare book investment. “There's an element of the rare and historical, and the rest is condition,” says Heddle. “Without the original dust jacket, if it’s been reworked, or touched up in any way; if it’s well thumbed, or if there’s damage to the spine, it could be worth 100, or even 200 times less.”

Clearly, like all alternative assets, those who purchase rare books seldom do so with the intention of making a profit. Similar to art, classic cars or stamps, the draw is aesthetic; the pleasure of possessing something original trumps the potential to generate a profit.

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