If, growing up, you were a passionate sports fan, the chances are that you have also come across sports cards. At the time, for you, they might not have been much more than a collection of trading cards or a game to play with your schoolmates and friends.
But, over time, these cards have taken on a whole new meaning, and they have grown to become a unique investment opportunity for many.
Like all investment markets, this comes with a great ROI potential, high volatility, and some unique risks that you need to be aware of before buying your first card. At the same time, over the past year, the trading card hobby has boomed, creating opportunities for investors across the globe that were never there before.
The reckoning point of how large this market has become came in February 2021, when a Luka Doncic rookie card was sold for $4.6 million and a LeBron James rookie card went for $5.2 million. These historic sales broke every existing record – and 23 out of the 24 highest card sales of all times happened within the following 12 months. If this is not a clear indicator that the market is booming, then what is?
But not so fast – here is all you need to know about investing in such a young and volatile market.
Sports Cards: An Overview
If you are approaching the world of sports card investments from the viewpoint of an outsider, it is easy to feel overwhelmed and confused. After all, sports cards have been in circulation for over 125 years, and the way they are traded and used has changed a lot over time.
Let’s start from the basics. Sports cards are trading cards related to sports and sports players. The term “sports” is often added to distinguish them from non-sport-related trading cards. While today it is possible to find an infinite variety of trading cards, sports cards were among the first collectibles ever released on the market.
While sports cards can vary in make and design, you are always likely to find the picture of the player and statistics and information about their performance. You can find trading cards related to sports like basketball, baseball, football, soccer, golf, UFC, boxing, ice hockey, tennis, and even racing.
A Brief History of Sports Cards
Today’s sports cards are direct descendants of marketing and advertising cards used by companies and manufacturers to advertise their products and services. The first set of trading cards showing a sporting theme was commercialized in 1886 by W.D. & H.O. Wills and included cards portraying 50 cricket players. As this project spiked brand loyalty and visibility, companies continued the sports card series with unique soccer, baseball, and basketball cards.
Since then, sets of trading cards were issued for each season of professional tournaments. Because the cards’ manufacturers do need to pay the players to gain rights over their images, sports trading cards are often portraying professionals rather than amateurs.
Aside from the prestige given to the card by its age, condition, player depicted, and sport-specific specs, the manufacturer that produced the card also influences its value.
Today’s Sports Cards Industry
Today’s sports card industry tells us a lot about the potential of investing in sports trading cards.
Firstly, it is important to take into consideration the deep transformation that financial services have undergone over the past decades. Today, investing is no longer an activity that only professionals have access to. In fact, with the advent of peer-to-peer (P2P) marketplaces, anyone can now start trading, buying stock, and selling assets. This has not only reduced entry barriers but has expanded the range of opportunities and choices. So, everyone today has access to trading shares, iconic cards, blue chips, and memorabilia.
At the same time, the market indices published by PWCC – a leader in the trading card industry – shows that the investment performance of professionally graded trading cards has skyrocketed. It has even outperformed the Standard & Poor’s 500! To these studies, it is important to add the fact that eBay reported a 142% increase in sports card trades in 2020.
The reason behind this sudden interest in trading cards might be related to many factors. Firstly, the pandemic has caused market volatility – but also investment opportunities that people have snatched up. Additionally, after the Bitcoin case, many investors now have a fear of missing out on alternative investments and they have tried to find yet undiscovered opportunities.
As the market continues to grow, there is no doubt that it holds profit and great return opportunities for all investors. After all, the sports card market is still very young!
Are Sports Cards The Right Alternative Investment?
An alternative investment is an investment that exists outside of the conventional investment categories of stocks, bonds, and cash. Sports cards, while they still live in a relatively young market, are gaining popularity as an alternative investment. There are three main reasons for which you should consider investing in sports cards:
- The market for sports trading cars is growing
- They come with a low correlation that allows you to reduce the risk
- They represent an unexploited alternative investment.
Let’s look at these reasons in more detail.
Sports Cards Market Growth
The sports cards market, which was worth over $13.80 Billion in 2019, is forecast to continue growing at a CAGR of 23% for the next six years, reaching an estimated market capitalization of over 98.70 Billion by 2027.
To understand whether this investment opportunity makes sense for you, it is important to look at the risks involved and the potential return of investment. However, the sports memorabilia world does not have the same principles and background research necessary to establish a risk and return ratio.
In fact, you might be familiar with some high-profile, multi-billion sales in the history of sports trading cards, such as the “Jumbo” T206 Honus Wagner that was sold for $3.12 million. But it is also worth remembering that some cards lost value overnight, leaving investors with a fraction of their initial capital.
Systems like the PWCC indices that publish the Top 100, 500, and 2500 aims to reduce the risk associated with trading sports cards. Nonetheless, the market is still too new and growing too rapidly – and, because of the lack of historical data needed to make precise predictions, it can be hard to understand what the risks involved are.
Portfolio Diversification and Low Correlation
Aside from the expected return on investment, some investors also tend to buy sports cards because it allows them to diversify their investment portfolio. In this strategy, sports cards don’t work too dissimilarly to other stocks: they are in a portfolio to minimize risk.
Trading cards do, however, have an advantage that other types of stock don’t have: they are often uncorrelated to other investments. This means that if an industry is entirely affected by a financial dip, a trading card investment – like other types of alternative investments – can help you minimize losses. While there is no study conducted specifically on sports cards, 2019 research shows that investing in art offers low correlation to other asset classes, thus protecting a portion of the investment and minimizing losses.
An Unexploited Potential
The last reason for investors to consider buying sports cards is that this is a relatively unexplored – and thus full of potential – alternative investment. One of the most common types of alternative investment is, undoubtedly, cryptocurrency. However, our notable alternative investment options are:
- Fine arts
- Real estate crowdfunding
- Precious metals
- Mortgage refinance
- P2P Lending
- Private debt
- Private equity
- Commodities
While these are all undoubtedly profitable choices, much of their potential has been exploited. Instead, for the young sports cards market, a bright future is yet to come!
Sports Cards and NFTs
This might not be a direct reason to invest in sports cards now, but there is a trend that you need to keep an eye on – NFTs. NFTs, or Non-Fungible Tokens, are unique codes associated with an object, piece of art, or asset. “Non-Fungible” means that two objects might have different values.
For example, two Bitcoins are fungible, because you can exchange one Bitcoin with another and have the same value. A “Token”, instead, is a unique code that represents a physical asset in the digital world.
But what does this have to do with sports cards? Thanks to blockchain technology, NFTs have enabled collectors and traders to start exchanging NFTs instead of real, physical trading cards. These NFTs represent the card, have the same value as the card, and confirm the ownership and authenticity of the card. Yet, these codes are not forgivable, modifiable, and immune to all risks physical cards are prone to (such as fires, scratches, and tears).
Nonetheless, it is important to keep in mind that NFTs are a new technology and, such it might hold risks that are not so foreseeable. If you have doubts about the technology, avoid using it to buy expensive cards.
Investing vs Collecting
Just because investing your savings into sports cards is not the right kind of investment for your needs, it does not mean that you have to miss out on collecting these cards. The interest in sports cards have been increasing over the past years, and, as the demand rises and the supply diminishes, the price of trading cards is bound to skyrocket.
Collecting them today might mean holding onto an important asset in the future – and, in the meanwhile, you can just find the gratification of having snatched an exclusive rookie card!
The Benefits of Investing in Sports Cards
Above are some of the main reasons for investing in sports cards. But, just like any other type of investment, this might not be the best portfolio addition to your needs. Here are some of the benefits to consider to decide whether to invest in sports cards:
Unlimited ROI Potential
The sports card investment market is still young and partially unexplored. This, similarly to the beginnings of Bitcoin, leaves plenty of space for future opportunities and unlimited returns on investments.
What also plays in the favor of new sports cards investors is that they are coming in at a reckoning point of the sports cards industry. In fact, many manufacturers have started to introduce valuation indices and standards, so that an asset can’t suddenly lose value. Additionally, market research companies have started to focus on the sports cards share of the market and its dynamics, thus supplying investors with important research to back up their actions.
Low Entry Barriers
For new investors, some markets are inaccessible. For example, real estate and certain cryptocurrencies are difficult to turn into profits because of entry barriers, high asset cost, or their limited unexplored potential.
When trading sports cards, you can start to do so even with small initial capital. In the beginning, you might buy and sell quickly and enjoy small profits that, over time, allow you to buy long-term, valuable assets. You can start trading today!
Sports Cards Are Easy To Convert Into Cash
The market for sports cards is expanding and, as we have seen above, major marketplaces like eBay have registered an impressive spike in trading cards sales just in the last year. This means that, unlike other more cumbersome assets, your trading cards are easily sold and converted to cash.
This is essential to avoid locking in your money in a stagnant market and find yourself without liquidity. After all, when a new deal comes along, you need to be able to quickly sell some of your trading cards, recuperate the money, and secure a new card.
The Risks of Investing in Sports Cards
Investing in sports cards can be a highly profitable choice for some investors. However, as the market stands today, trading sports cards is still risky and more suitable for risk-prone investors that have a thorough knowledge of the market they are operating in. Here are some of the risks you should watch out for.
Consider Fractional Ownership
Fractional investments, in the field of sports cards trading, has its pros and cons. In the video below, you can learn more about this option:
Simply, fractional ownership is an alternative to full ownership of trading cards. This could be an optimal choice to lessen the risks involved, but to be worth it, this has to be a long-term strategy. Sites such as Collectable allow you to get started with your sports card fractional investments.
Physical Risks
Trading sports cards is not like trading currencies or cryptocurrency. These certificates are often digital and digitally stored, which means that they are protected from most physical risks – such as fires and theft – and easily accessible through a cloud system. However, unless you are buying the NFTs attached to a sports trading card, you will receive a physical card in exchange for your money.
And, as the value of the card itself is influenced by its condition, manufacturer, and quality, it is vital to keep your asset safe. Of course, you should not just keep them in a pile, but even when in a secure folder, they can be easily affected by physical factors. Beware of humidity, moisture, high temperatures, and UV damage!
Limited Historical Data
As we have seen above, market researchers have started to focus on the dynamics and potential of sports trading cards. However, for now, the knowledge of the ROI and risks involved with sports cards transactions is still extremely limited.
Without the necessary historical data that backs some other investment types, investors need to truly understand the industry and the value of their assets. This is because they cannot just rely on clear analyses of how a certain card performs.
Understanding A Card’s Value and Potential
If you have made it this far and you have decided to invest in sports trading cards despite the risks associated with it, you need to understand what cards are worth investing in. Here are three analyses that can tell you a lot about the value of your card:
- Preliminary checks
- Type of card
- Variable influencing its value
Let’s have a look at these value indicators in more detail.
Preliminary Checks
Whether you are going through your old collection of sports cards to understand whether there is something valuable there or you have found an interesting specimen on eBay, you need to start your analysis by finding:
- The year of the card
- The card company name
- The player’s name
- The card number
New rookie cards of young players can be an interesting investment as they have a full career in front of them and can therefore cause the value of your card to skyrocket. However, this can be volatile as you can’t be sure about how the career of that player will play out. Instead, vintage cards are seen as more stable investments.
Type of Cards
Once you have completed the preliminary checks, it is time to look further into the cards’ specs. Here are the conventional classifications – and why they are more or less advantageous.
- Rookie cards – rookie cards are those portraying the player in the year of their debut in their port’s most prestigious league. These are collectively considered the most valuable cards because they cannot be manipulated and represent the first card of a player ever printed. Of the most expensive cards ever sold, many are rookie cards.
- Inserts – inserts are additional cards that the manufacturing company voluntarily inserts in the packs. Inserts have not been held in so much regard as they are today. These cards are created in a fun, artistic design that is different from the other cards. And, because investors are looking at new ways to exploit sports cards’ potential, many have become interested in the unicity and scarcity of these cards.
- Complete sets – complete sets are sets that include all cards in a certain collection. For example, collectors might go out of their way to chase cards and complete the 2019 Panini Prizm Basketball set, for example. While this can be a fun activity for hardcore collectors, a complete set does not add value to the single cards.
- Boxes – also called Hobby Boxes or Jumbo Hobby Boxes, are special boxes that have an autographed cards in them. You can also find more common card boxes in retail shops. In both cases, you can consider keeping them sealed (which holds their value) and sell them after their value has risen. Or you can open the boxes and sell the individual cards. It all depends on the kind of boxes and what are you likely to find in their given year and manufacturing house.
- Autographed cards – autographed cards are valuable because they are rare. In fact, the manufacturing company often prints fewer autographed cards than regular ones because they need to pay the player autographing the cards. The more popular the player is, the higher is the price paid, the fewer cards on the market, the higher the value of each is.
- Jersey patch cards – these are cards that have a patch of the player’s jersey on them. Game-used jersey patches are more valuable than event-used patches and reserved for exclusive collections. They can be extremely valuable.
- Error cards – these are sports cards with an error or misprint. Because they are rare, they can be extremely valuable. Because of today’s quality control, they are becoming rarer.
Variables Affecting Your Card’s Value
Now you can start to understand the value of the card you have or you are thinking of investing in. Now, some variables can affect this value, including:
- Condition – grading companies analyze a card’s surface, corners, centering, scratches, edges, and creases to assess its values. Cards that don’t undergo this professional analysis are commonly called “raw”. These are sold for a lower price, but they can be risky.
- Brand – analyze the company that makes the card. Respected names include Prizm, Mosaic, Optic, Select, Revolution, High-end, National Treasures, Immaculate, Flawless, and Opulence. The value can vary depending on the maker.
- Scarcity – the number of cards in circulation can influence the value of a specimen. The more scarce a card is, the highest will be the price to pay for it. The PSA Population Report can help you find out how many cards similar to your were printed.
- The company grading the card – if the grade is graded and not “raw”, look at who conducted the analysis. PSA is currently one of the most respected options and a PSA grade can increase the card volume.
Some other values that can cause temporary fluctuations in a card’s value include:
- The athlete’s cultural relevance
- The athlete’s performance in a game or season
- Events that affect a player’s career
How To Start Investing in Sports Cards
As we have seen above, the world of sports card investing is relatively new and unexplored. Because of this, you can undoubtedly secure some stellar opportunities for yourself and your portfolio. However, getting started can seem like a daunting task. Let’s break down the process!
Learn About the Market
The first step is to learn more about short-term and long-term market trends. You might have heard phrases like “buy the dip” and have an understanding of how to read conventional investing charts. When investing in sports cards, it is important to keep an eye on how the market is projected to change, so that you can move accordingly.
As we have seen, official predictions foresee that the sports cards trading market will be worth almost $100 billion by 2027. Studies also report that baseball, basketball, and association football will overtake other sports cards, and North America and Europe are key players in the game.
Use Data for Predictions
For investors looking to approach the sports cards investment market, the “Sports Cards Investor” website is a starting point for research. Here you can find the latest news from the market as well as investment tips and tricks.
Decide On Your Budget
Investing in sports cards does not come without risks. So, if you are just starting out, you are unsure about what to expect, or you are not familiar with the market, you must set a budget for your transaction and minimize impactful losses.
Be Clear On Your Strategy
Investing in sports cards without a strategy can increase risk and limit potential. Today, there are several strategies that you could consider. In the video below, you can get an overview of the most common ones, as well as some hints to trends that need to be taken into consideration:
Remember to decide on your strategy depending on your risk tolerance, perception of value, and assets. Some of your options include:
- Long-term investing – can be done with vintage or modern cards, comes with fewer risks, offers great ROI, and requires a small initial capital. It can take many years to yield results.
- Flipping – Flipping is a type of fast trading and involves buying dips and selling a few days or weeks later once the card has risen in value. Flipping cards can offer a great ROI, fast. However, you will need to know the game, player, tournament, and market inside out for these swift transactions.
- Collecting – collecting is about improving your assets with sports cards, mostly for the fun of finding and snatching up rare cards.
Test Different Marketplaces
There are many markets where you can find valuable sports cards. These include:
- eBay
- Trade shows
- Specific retail stores for trading cards and standard retail stores
- Auctions – online or in-person
If you are just starting out, eBay could be your best option. Aside from offering buyer’s protection, it also offers options to buy and sell such as auctions. It allows you to trade cards in no time.
8 Tips To Increase Your ROI
In the sections above, we have covered what sports cards are, how to identify the most valuable ones, how to trade them, and whether they are a valuable alternative investment type. If you have decided that, in your case, trading cards and investing in sports cards are beneficial investment types, check out the tips below to maximize your ROI.
Know Where and How To Buy Cards
The best place to buy and sell trading cards for the average investor is currently eBay. Here you can benefit from competitive auction offers and leverage tools such as the site’s advanced search to establish what is the right price to pay for a certain card.
Opt for PSA 10 or PSA 9 Graded Cards
As we have seen graded cards are a more secure bet for investors. When buying graded specimens, stick to PSA 10 or PSA 9 sports cards. Safe bets are those revolving around the present and future Hall of Fame Players’ PSA 10 graded rookie cards and highly regarded prospects.
Beware of Raw Cards
Raw cards are easily accessible and preferred by first-time investors because of the initial low buying cost. They can come with substantial risks for the investors, but if you have started to understand what professional buyers look for, invest in the card and then send it to PSA. Once it is back with a grade, you can sell it for a higher price and maximize your ROI.
Know When and How To Sell
Selling your sports cards is just as delicate as buying them. When and how you will sell them depends on your strategy. However, certain tips can maximize your investment. For example, if you are selling prospect’s rookie cards, do so before they are called up. This is to prevent fluctuations in the game or the athlete’s career from affecting the card’s value.
Don’t Focus on Just One Sport – Diversification is Key!
As far as you know how to identify valuable cards, you should consider expanding in the different sports, including baseball, basketball, hickey, football, boxing, soccer, and golf. You should also maintain a level of diversification within your portfolio as well, so don’t just invest in sports cards, but be open to other assets as well.
Consider Buying an NFT
NFTs are a new technology but they are growing steadily and are becoming increasingly more used for purchases – both digital and physical! Through specific marketplaces, NFTs are now associated with trading cards, but also GIFs, pieces of digital art, and real-world assets such as buildings and homes. Learn more about the benefits of trading the NFT associated with a certain sports card instead of the card itself – it might be safer and faster!
Keep Track of Your Buying and Selling
Most investors approach the world of sports cards trading as a game or fun activity. And, in the beginning, it does not need to be more than that. However, if a considerable portion of your portfolio is taken up by sports cards, you must track your buying and selling. This allows you to understand your ROI and keep track of your transactions – for this, all you need is a simple spreadsheet!
Keep Your Cards Safe
Avoid stacking your cards unprotected in your home. Instead, bring them to a local bank and invest in professional containers to store them and prevent them from being affected by factors such as humidity, moisture, or UV rays.
Bottom Line: Find Expert Advice
Investing in sports cards can be both exciting and overwhelming. If you are thinking about expanding your investment portfolio by tapping into this market, you must understand the risks involved and learn more about the sport, the athlete, and the world of sports cards trading. In any case, finding the expert advice of an experienced trader can help you take advantage of the hidden potential of this investment option. Get in touch with Sully today.