I have the largest collection of PSA-graded John Elway cards in the world, as far as I know.
Are Sports Cards Better Than Stocks?
There is much evidence to support the notion that trading cards are a better investment than stocks. Of course, investing in either one carries risks. There are simply never any guarantees one will make money. Losing money is more than possible with either.
As somebody who has invested in both stocks and sports cards, I have personal experience to share. In that experience, I have done better investing in sports cards. I have also found that investing in sports cards is a lot more fun than investing in stocks.
If you're a fan of sports, investing in cards can be a lot more invigorating than investing in companies. Also, if you're a fan of sports, you already have a lot of practical knowledge that makes investing in cards less risky. It's that lack of knowledge that often dooms people who invest in stocks.
So here is what I've learned investing in sports cards. I hope it helps you make money and have fun participating in this hobby.
Trading Cards Are Liquid, Tangible Assets
- Trading Cards Continue to Trounce the S&P 500 as Alternative Investments
As of December 31, 2018, an index of the 500 most valuable trading cards yielded a 10-year return on investment (ROI) of 165% compared to 71% for the S&P 500.
A Few Personal Examples
The above card is a rookie card of Green Bay Packers' quarterback Aaron Rodgers. This card is the 2005 Topps Black. This is a variation card of the regular Topps card, which looks the same, except the black border is white. There is a regular version, black version, and gold version. The Topps Chrome card also looks identical to this one, except it has a reflective surface.
In 2018, I purchased this card for $153.99. In 2020, I sold this card for $2200.
I purchased a significant number of Aaron Rodgers rookie cards in 2018 and sold a number of them in 2020. I specifically purchased these cards as an investment. For the most part, each returned somewhere between 2x and 15x of their investment cost. The type of player (established with upside) and type of card (rookie) are instructive for investors.
The below picture shows a number of John Elway cards I own. I did not buy the John Elway cards with the intention of selling them, but I would say that overall, the amount of money I have invested in those cards would not be returned if I sold them all today. In general, their value has declined. However, the price of the Elway rookie and his second-year card have increased significantly. His rookie card has increased about 7x from 10 years ago, while his second-year card has probably increased 3x from 10 years ago. Both are good returns.
In retrospect, the smartest thing I could have done with my money on the Elway cards was to invest it strictly in his rookie cards. That would have returned the most value.
The lesson here is to use investment money for the most prized card of a player. That doesn't mean rarest necessarily. Whichever card has the highest demand usually represents the best investment if a return on your money is the goal.
Buy During the Off-Season
The chart below this capsule is meant to demonstrate one thing: You do not need to hold cards for very long in order to make money. If you buy during periods of low demand and sell during periods of high demand, you can make significant amounts of money, depending on your investment.
While periods of low demand are harder to figure out with stocks, they are not as hard to figure out in sports cards. Basically, when a sport is not playing, that is the time to buy. Buying during a sport's off-season is an excellent way to make money. Further, it's a good time to make long-term investments as well. Simply put, you should not buy cards at any other time if you want to keep your risk low.
As demonstrated by the example below, had you invested in 10 copies of the 2005 Topps Chrome Aaron Rodgers rookie card in June 2020 and sold those same 10 copies in September, you would have made approximately $8,000. Not bad!
Keep in mind, this doesn't apply to any player, but if you do your research, it does apply to many of the star players. As excitement grows when the season approaches, prices go up across-the-board for most star cards.
The lesson here is that, in order to lower your risk, make most of your purchases during the off-season and most of your sales during the playing season.
2005 Aaron Rodgers Topps Chrome Sale Prices June 16, 2020–Sept. 16, 2020
Don't Buy Boxes Expecting to Find the Card You Want
If I buy a box of football cards to open, I do so because it's fun, not because I expect to find something. The experience of tearing open packs is just something I enjoy.
While you will see tons of cards being auctioned on eBay that were pulled directly from boxes and packs, don't get caught up in that chase. Trying to pull cards as an investment strategy is a losing proposition.
If you want to target a specific player, but that player's cards directly. It will cost you a lot less money in the end.
Get Valuable Cards Graded
In October 2020, PSA became so overwhelmed with grading requests that they had to discontinue vouchers for their clubs for a limited period of time—the hobby was on fire.
Despite the wait for getting cards graded, it is worth it to have your valuable cards graded provided that you pulled the card straight from the pack, put it in a penny sleeve, and never touched it.
That said, even cards pulled straight from a pack don't automatically garner PSA's highest rating, which is a 10. A PSA 10 card of the right card and the right player can add significant value. However, it is very important when sending cards to be graded that you know what to send and know how to evaluate the cards you submit. If you don't want to go through this process, just buy the cards you want in PSA 10 grade, though you will often pay a premium.
When submitting cards, look at them carefully. Are the corners perfect? How is the centering? Are there surface scratches? Make sure you check all these things before sending a card to be graded.
Beware New Rookie Cards as Long-Term Investments
The purchase and sale of rookie cards of players who are right out of college is all demand, excitement, and expectations. There is a term in economics that applies well to this subset of cards: irrational exuberance. Alan Greenspan coined the term in reference to the stock market in a 1996 speech.
Consider for a moment that in October 2020, eBay recorded a sale of a signed Joe Burrow PSA 10 rookie card for $2225.00. There are actually some sales for his cards that could be as much as $6000.00, but that one isn't verifiable since the seller took the best offer. The card I reference was sold at auction, and there's a picture below.
I purchased an equivalent card of Aaron Rodgers, also a rookie and also signed and also PSA 10, for $999.99. In fact, I purchased two different cards at that price with those characteristics.
The fact that a Joe Burrow rookie card is worth more than an Aaron Rodgers rookie card is a little crazy given that Joe Burrow hasn't done anything in the NFL yet while Rodgers has won two MVP awards and a Super Bowl. However, that's the way the sports card market works—irrational exuberance.
For me personally, I would never buy any rookie cards of players who haven't established themselves because you're buying at a potential ceiling with a floor of next-to-nothing. This same situation occurred with Josh Rosen's cards when he was a rookie. Most rookie cards are bad long-term investments when purchased during the hype of their rookie year.
If Joe Burrow ends up having a really good year, then you could make some money selling his cards toward the end of the year. But generally, it's a high-risk endeavor to try to buy these rookie cards in an attempt to guess who will do well. Such purchases end up being losing investments in the long run. If you pull any of these cards from a pack, it's best to sell them right away.
The other thing you can do is speculate on players who are flying under the radar and have the potential to have a break-out game. There are always unknown rookies who are getting significant playing time who could blow up at any moment. If you target those types of players, you can buy a lot of their raw rookie cards for next to nothing and if they have a great game, sell them off because the demand for their cards suddenly skyrockets.
A Terrible Investment—All Hype
Beware of Buying Raw Cards
I have been burned buying raw cards more times than I can count. Simply put, most people selling cards have no incentive to provide an accurate rating of a card's condition. Further, most sellers don't really have the expertise to do so anyway.
When buying raw cards, there is much less risk when buying newer cards. These would be cards that simply haven't been available for very long. If you want to buy raw cards, you would want to limit yourself to recently released rookie cards where the seller is likely to have pulled the card and put it straight into a protective sleeve.
If you are buying older cards, buying raw cards is much riskier, particularly if you make that purchase from an individual seller who is not skilled in rating cards. I would never buy a raw, classic card from an individual seller anymore. I would buy one from an established professional card seller, maybe. Generally, I just think the risk is too high. I'd rather just buy what I want graded already. That way, condition is guaranteed.
If you are committed to buying raw cards of a new player, make sure you buy a number of them to give yourself the best chance of getting a perfect card. Even cards straight out of the pack are not guaranteed to be perfect and often are not.
New Rookie Cards Can Be Great Short-Term Investments
The most-hyped of the rookies usually garner inflated prices from the second the cards come out. Even so, it's still possible to benefit from that hype if you purchase their cards before the season begins and then ride the wave of excitement at the beginning of the season.
As noted above, prices for those cards may increase up to 60%. Given that the vast majority of rookies do not go on to have successful careers, you are going to make the most money selling those cards when the hype is the greatest, likely at the beginning of the season.
Of course, if you had sold all your 2000 Tom Brady rookies right away, you're most likely lamenting that decision. However, Brady is the exception, not the rule. That said, it's also likely that Brady, along with the cards of other 6th round draft picks, were extremely cheap back then. Similarly, the unknown, un-hyped rookies of today who might break out represent an opportunity. Unfortunately, you're looking for a needle in a haystack.
If you're buying cards specifically to make money, buy those rookie cards early and sell them all when the hype is the greatest or after a particularly good game by that player.
Buy It Now vs. Auctions on Ebay
Here's a general rule:
Buy your cards in auctions, and sell them using Buy it Now.
Of course, this isn't always possible because sometimes a card you want isn't available in auction format. However, it's generally true that you are going to get much better deals in the auction format. My experience suggests that cards sold in auctions will more often sell below the expected market value. Sometimes, if the seller makes a mistake in terms of when the auction ends, you can walk away with a great investment purchased well below market value.
My experience has been that I get better deals buying in auctions and better sales prices by listing my cards at the highest market value price and letting people submit best offers. By listing cards at high market value or above market value, it creates the perception of value. In that situation, people are compelled to accept that value and even if they counter your price, it's still usually above market value, particularly when you're negotiating in a market that's going up. Only auction your cards if you are desperate to sell.
It is also true that many of the established sellers use auctions to sell their cards. With high demand cards, this can be a good strategy. And those companies do so much volume, they don't have to worry about not doing well in a few auctions. Their reputation usually guarantees a lot of bidders and a good final price. However, you, as a single investor, need to maximize the amount of money you make on your sales, so I recommend using a fixed price on your cards and allowing best offers. The downside is you may never sell some things.
I'll provide one example. In October 2020, I targeted a particular rookie player. His cards were only available raw at the time, which was fine since I was just speculating. He's very talented and getting plenty of use but on a bad team. I think he's going to be a great player. His cards were selling for a wide range of pricing. Some of the rarer cards were hundreds of dollars. However, many of his cards were being sold at auction by people not familiar with some of these strategies. As a consequence, I was able to pick up short prints, signed cards, and jersey cards for just a few dollars.
However, it is also true that the reverse can be the case: Buy it now offers a lower price than auctions. I just had a case where I was trying to buy a particular card and the auction price had escalated to over $450. So I searched the Buy it Now offers. There was one for $430 with a "best offer" option. I offered $400 and the seller took it. The lesson here is before you impulsively hit the "buy" button, do your research.
One final thing, if you choose to auction any cards, make sure you read up on the best time to end an auction (usually Sunday in the evening). It can increase your final sale price.
Always Monitor Sales History
Whether you are buying or selling, you need to review sales history before making a purchase or before listing a card for sale. It's important for your investment to know where you are in the market at any given point.
Unlike stocks, it's easier to figure out whether you are at the market bottom or the market top based on where you are in the sports season. Be careful making purchases during the top of the market or selling during the bottom of the market.
Knowing the sales history can also help you negotiate and recognize when you are getting a good price. Simply put, if you aren't aware of this information, you are putting yourself at a disadvantage.
Invest in Established Players to Minimize Risk
It's important to understand your downside and upside risk with any card investment.
The basics of card investing are this: There's more downside risk with new players and less downside risk with established and/or retired players. If you do not want to lose money, your best bet is to invest in cards of a player who is retired and already in the Hall of Fame in his respective sport. While the upside potential of those cards is probably less than a random rookie and the amount of time it will take to see that card go up is longer, it's a much safer way to invest.
For instance, 10 years from now, what's going to be worth more - a PSA 10 rookie card of Joe Burrow or a PSA 10 rookie card of Joe Montana?
Well, it could very well be the case that the Joe Burrow card is worth more, but it is also unlikely. Remember, your risk is reduced buying cards of established players. If you don't want to lose money and have a long time-line for your investment, this is the way to go.
Controlling the Market on a Particular Card
This is a little advanced, but those who buy cards should be aware of this situation. I worked in the book business for a long time and it was common that on particular textbooks, if you had enough capital, you could control the price on a particular textbook when demand was high and I controlled most of the supply.
Here's how that's done. Let's say you're interested in buying the 2005 Aaron Rodgers Bowman rookie card. There are three cards available on eBay for $799. There is one other card available on eBay for $999. So, you buy up the three cards at $799. Now, the cheapest anyone can buy that card for is $999. You have effectively moved the market on that particular card.
Keep in mind, this concept is hardly fool-proof. However, it can work well on cards with limited supply. I'm not saying you should try to pull this off a lot, but it can be done depending on the amount of money you have available to you. If you need some fast cash, sometimes you can buy up the cheap cards and relist them at a higher price provided your price is then the lowest available.
Obviously, the problem with this concept is that you can't guarantee that you can control the supply, and somebody can swoop in and undercut you, but there are times where it can work and you'll be aware that you might be able to corner the market on a particular card. When that happens, you can also control the market price.
If you have questions about specific cards, particularly in football, I will do my best to answer them. Please leave them in the comments below. Usually, with sports cards, questions and answers provide really good insight into the process of investing well in the hobby.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2020 Allen Donald
Danny from India on October 02, 2020: