In this article, I compiled the five collecting principles that I used to turn my $7K investment into a $100K+ Pokemon card collection in less than 2 years.
Many believe traditional investing, diversifying your money between stocks, bonds, and land, is the only “right” way to invest your money.
Let us imagine that I would have invested $7,000 into the S&P 500 two years ago. My position would be worth approximately $9,700 today; a commendable 39% increase. However, having used those funds to invest in a variety of collectibles has rewarded me with a staggering 1,328% increase in value.
It is important to be aware that there is no such thing as a free lunch. Investing in collectibles has some drawbacks. Your cards will not be as easy to liquidate, nor will they pay you annual dividends. Having said that, addressing these flaws is not my objective for today. In this article, I focus on teaching you exactly which collectibles to buy, and which mistakes to avoid, to maximize your returns.
Picasso’s masterpieces sold for nearly $110 million about a month ago at the Bellagio hotel in Las Vegas. Surely people didn’t like his paintings so much they were willing to pay an 8-figure sum for it? And if so, many artists would be able to recreate his paintings for a fraction of that money.
Indeed, part of what gives these works of art their value is the fact that very few exist, and that Picasso is not around anymore to churn out more masterpieces.
When investing in Pokemon cards, or any other collectible, you want to make sure to purchase a piece that has a (very) low number of copies in existence. Of course, we can’t all go around buying Picasso’s, but there are plenty of rare cards out there that still fly under the radar. These are the cards you want to take a closer look at.
Take the example of the Mysterious Pearl Winter Challenge promo. While 81 copies were awarded during a tournament in March 2007, more were awarded later in 2007 in a second event. It is hard to estimate the exact number of copies that got awarded during the second event, but many assumed this number to be rather high.
After speaking to more seasoned collectors and attendees of the tournament, it turned out an estimated 300–350 additional copies were awarded. In addition, less than 85 copies had been professionally graded according to PSA population reports.
I went ahead and purchased a PSA 9 copy of this card for $590 in March 2020. Roughly one year later, people began to realize there were not as many copies around after all. Less than one year later, several copies of this card sold for nearly $5,000.
Principle one: Look for rarity in cards before the market catches on.
You may now start to wonder whether any collectible with a limited number of copies can expect to yield Picasso-themed returns. Unfortunately, the short answer is no.
Despite the fact that millions of Pokemon unlimited base cards have been circulated, a completed set will fetch you around $900. On the contrary, the Harry Potter TCG has a significantly smaller print run, yet only fetches $450 on eBay. Clearly, in the current market, there is simply a lot more demand for Pokemon TCG.
Rarity vs Scarcity: Note that the Harry Potter TCG in the example above is not a rare collectible. It is scarce, as there are only a very limited number of copies printed. However, it is not rare. Not only is the demand very limited, but anyone can go online and order a large amount of Harry Potter Boosters right now. A rare collectible, even when having limited demand when still flies under the radar, is often not as easily accessible that one can purchase a large number of them at any point.
Look for a collectible that has desirable attributes or features an artwork that you believe the general public will enjoy. A Pokemon card featuring a Lugia is likely to perform much better than a Pokemon card featuring a Muk.
A word of caution; in looking for popular attributes in your collectible, always stick to the principle of buying under-the-radar pieces. Never follow the market in buying popular cards when the element of rarity is missing.
To illustrate my caveat, let us take the example of a PSA9 Base unlimited Charizard. In March 2020, Logan Paul made his entrance into the world of Pokemon TCG. Preaching his love for the Base set, many of his followers started to purchase PSA9 copies of the Charizard base card, which at the time sold for roughly $1,200. Less than 3 months later, this same card was selling for the astronomical price of $7,000, a sixfold increase.
To any experienced collector, it was clear that this card was far from rare. Let With millions of Base set Charizard copies circulating eBay, and over nearly 6000 PSA 9 copies graded, it was clear this surge in price was a temporary one. Today, this same card is selling for a little under $1,500 on eBay.
Principle two: Look for desirable attributes in your collectible, but never follow the market
3. Historical trends
Imagine for a moment that, when you wake up tomorrow, Picasso’s paintings would have significantly increased in value. The community of painting collectors started to notice the Picasso paintings were undervalued relative to similar pieces, and word got around quickly.
Do you think the price will continue to rise a drop back to its original price?
The truth lies somewhere in the middle. Once an investment piece is identified to be undervalued, demand will rise and the market will self-correct. However, free markets tend to overshoot, during and upwards correction, and undershoot during a downwards correction.
This is what day traders call overcorrection. After some time, people will start to identify paintings are now slightly overvalued, and the market will once again readjust.
If you plan to invest in a certain collectible, make sure to do your research. Has the card significantly increased in price in the last weeks? Chances are the market will correct slightly downwards in the upcoming months.
Has a collectible with good fundamentals (condition, rarity, scarcity) recently experienced a sharp decline in price? The market will likely correct upwards in the near future.
Principle three: Look at pricing trends and use the principles of overcorrection to your advantage.