The Top-Performing Alternative Investments: Baseball Cards
Would you know which rookies to stockpile? Can you name the legends that will hold sway forever? If so, batter up!
How It Works: There isn't an official, sanctioned market that regulates the exchange of baseball cards. Investors do their public buying and selling of the cardboard commodities in physical venues like specialty hobby shops, auction houses and card shows like the National Sports Collectors Convention. Online sites like eBay (EBAY), Beckett.com and SportsBuy.com are also quite popular and contain millions of user listings.
Who's Investing and Why They're So Good at It: Baseball card collectors are, by and large, avid fans of the sport and do so for nostalgia's sake. The kids of yesteryear, who flipped through their new packs of Topps and traded with the other boys in the neighborhood, are today's investors. Only this time around they wouldn't dare clothespin their precious investments to the spokes of their bicycles.
Those who make real money in the baseball card game are professional dealers who have studied the business and the game itself, and have intimate knowledge of card values. Some savvy collector practices include stockpiling rookie cards of highly anticipated players cheaply when they first hit the market.
Alan Rosen, AKA Mr. Mint, the self-proclaimed "World's Largest Buyer of Baseball Cards" and who, in 1988, Sport Illustrated dubbed "The King of Cards, The Duke of Dough" spent over $5 million in sports cards and memorabilia last year alone. As the nickname implies, his strategy is to buy only mint-condition baseball cards, with money being no object. Clever self-promotion then helps him more easily flip the cards for profit.
What They're Making:
Returns for successful investors vary wildly and depend on several factors -- first and foremost, the supply and demand of the market itself. The collector's shrewdness and foresight to know how well legendary players will age and if current players will stand the test of time also play a part, as do the individual cards themselves. Sometimes it's just the luck of the draw, like discovering grandpa's vintage baseball card collection -- or, as was the case for California antique store owner Bernice Gallego, making over $75,000 after fortuitously digging up an 1869 Peck & Snyder Cincinnati Red Stockings card from storage.
Why They Really Do It: Choosing a large-cap stock mutual fund with your Schwab investor advisor probably doesn't evoke warm fuzzy feelings. But you don't store your monthly earnings statements in hard plastic sleeves and away from direct sunlight, either. Baseball card collectors and investors do it for the love of the game. It affords them the opportunity to put a price tag on sentimentality.
How to Get Started: Before investing, purchase a baseball card price guide, like Beckett's or CardPricer, and familiarize yourself with various card publishers, the card grading system and the trends surrounding what cards are appreciating and depreciating. Auction houses and websites will allow you to determine where to find the best bargains and below-market deals. Virgin investors should start with the safest bets, i.e. rare, sought-after, pre-1970 cards, rookie cards from the Hall of Fame roll call and cards from current rookies projected to have long careers with marquee-name potential. Only venture into speculative, riskier territory after getting a grip on the basics.
Topps, the leading producer of sports cards, sells 12-packs of randomly packaged baseball cards for about $2 at big box retailers, as well as 660-card sets for about $60 which are available on their website or at hobby stores.
Amateurs Be Warned: This ain't your father's baseball card market. In its heyday of the 1980s, card collecting was considered a bona fide investment alternative, yielding annual revenues of roughly $1.4 billion. But the bubble burst with overproduction and subsequent devaluation -- as well as the 1994 baseball strike, from which the market never fully recovered. Today, new merchandise garners only $200 million a year.
The ebb and flow of the market determines how much cards are worth. With the exception of pricey, rare and vintage items, card values will decline during bearish times.
Buyers need to be aware of overvalued and counterfeit merchandise. Even seasoned experts like Mr. Mint have been hoodwinked. A $525,000 investment resulted in a $200,000 loss after the card king purchased what he believed to be a deal on a large collection of unopened packets.
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