Are collectibles good investments? If so, all of them are?
Collectible enthusiasts often let their passion guide them and try to justify all their purchases with the phrase “I’m investing.” Squandering money in this way is widespread and unfortunately leads to small and not-so-small fortunes ending up minuscule.
In the last article, we discussed the stages that a collectible goes through and how it transitions from being something speculative to something more stable over the years (if it gains popularity among collectors).
Today, we will explore which collectibles acquire the status of being worthwhile investments. Then, as always, we will relate this to Pokémon TCG to draw conclusions regarding this specific hobby.
Investment vs. Speculation
First, we should describe what speculation and investment mean, as there is often confusion between the two, leading us to make financial mistakes.
Investing means exchanging money or resources for assets that you expect to increase in value over time, resulting in capital gains.
Good investments tend to focus more on the asset’s value rather than its current price. Above all, they are planned with a time horizon of more than 5 years.
On the other hand, speculation means trading money or resources for less stable or untested assets, hoping to make substantial profits by selling them in the short term (less than 5 years).
Speculations tend to focus more on the price of the asset at a specific point in time rather than its true value. Speculative bubbles and moments of FOMO often determine the success or failure of these risky operations.
Assets considered “good for investment” usually bring moderate gains or losses with lower risk. Compound interest and the passage of time are what typically turn portfolios containing such assets into significant wealth. Examples include quality real estate or globally weighted index funds that encompass the best companies worldwide.
In contrast, speculative assets come with higher gains or losses accompanied by high risk. Examples include stocks of new companies, shitcoins (a term referring to highly speculative and volatile cryptocurrencies), and also most collectibles (or specific segments within each of them, as we will see later).
Lack of financial education can lead many to think they are investing when, in reality, they are exposing their capital to significant risk…
Now that these two concepts are clear, and before we continue with the topic, you might be wondering:
And what if I’m simply collecting?
It is true that speculative bubbles and significant price increases in many collectibles, including Pokemon TCG, have attracted many investors and speculators to hobbies that were once predominantly for collectors.
While the three groups of people learn to coexist and adapt to a new reality, collectors still have their share of the pie and assert their presence.
And yes, if you are someone who is in the hobby solely for the joy of collecting, you may not need to worry as much about the differences between investing and speculating or the relationship between cards and money. Focus on collecting sensibly.
Just make sure to collect responsibly (try not to sacrifice your basic needs or struggle to pay rent for the sake of buying cards) and enjoy the process.
Now, let’s focus on the main subject at hand…
Which collectibles could be considered suitable for investment?
In traditional finance, a company with a “high investment grade” is one that implies a low risk of default, making it able to obtain cheap financing (investing in it is deemed safer by credit rating agencies).
In the world of antiques and collectibles, achieving the status of being “optimal for investment” means being a low-volatility asset with clear long-term appreciation potential.
Collectibles that attain this status are those that fall within the top 10-15% of each hobby. This is generally determined by the industry.
Here, I would like to make a couple of points based on my opinion and experience.
Collectibles themselves fall into the category of speculative assets in general. And even when they belong to a mature market (read this article to understand what I’m talking about), they are not immune to public loss of interest and drastic price declines.
Therefore, I prefer to set that percentage at 10%, rather than extending it to 15%, for collectibles in a mature state, such as ancient coins.
On the other hand, when we talk about a collectible in its speculative stage, like Pokemon TCG, I like to limit the “suitable for investment” status to 1-3% (perhaps you could convince me to consider up to 5%).
You can call me conservative if you want, but always remember the distinctions between speculation and investment that we made at the beginning of the article. When I invest, I do so with a minimum time horizon of 5 years in mind, but more likely closer to 10-15 years.
What collectibles should we consider to include in this category? Let’s talk specifically about Pokemon TCG.
Entering this 1-3% range is not an easy task.
The requirements are to excel in three characteristics simultaneously:
Rarity, condition, and demand/liquidity.
This exercise requires some serious thinking, and when you think you have narrowed it down enough, narrow it down even further. Always considering all three characteristics at once.
Only the “Blue-Chip” cards make it into the 1-3% range. Examples could include:
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Charizard 1st Base Set English PSA 10
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Charizard No Rarity PSA 10
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Rayquaza Star English PSA 10
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Pikachu Illustrator PSA 10 and PSA 9
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Kangaskhan Family Event Trophy PSA 10 and PSA 9.
As you can see, we are talking about items at the pinnacle of the hobby.
If you’re wondering whether your Moonbreon fits into this category, I’m sorry to say that it does not.
With a PSA 10 population over 5,000 and an estimated print run in English exceeding 85,000 units, we cannot consider Moonbreon as scarce.
On the other hand, its counterpart Umbreon Star in PSA 10, with a reported population of 55 and tremendous demand whenever one becomes available for sale, would likely fall within the 3-10% range of the hobby.
These cards are the ones that are most likely to maintain a high value over the years. Even if the hobby were to suffer a major setback and interest in it were to halve, there would still be people willing to pay fortunes for these types of pieces.
Even if collectors’ preferences were to change and focus more on other aspects of the hobby, such as sealed products, these kinds of cards would always have demand.
This makes them much less risky investments.
Most of the cards you think you’re investing in, pose a significant risk to your portfolio if you’re genuinely buying them for that purpose.
Overprinted products, although they may initially reach high prices, carry the risk of plummeting when collectors’ interest shifts toward “the new chase card.”
This may be the problem we will soon see with all this hype surrounding the modern era. Some things will manage to maintain collectors’ interest (yes, it is possible that Moonbreon becomes the flagship of this new era), but most will not.
We must not forget that this is nothing more than cardboard with a dose of nostalgia/passion, and value is primarily driven by scarcity and demand.
Conclusion
As we mentioned before, you may simply be collecting what you love, and you may not care at all about the financial performance of your collection.
Either way, I hope that today you have learned some concepts that you can apply at some point or that have shed some light on the topics discussed.
Take a moment to think about what, in your opinion, would fall within that top 3% of the hobby and feel free to share it below.
Let’s start the discussion. 
P.S.: To help you compile your list, this article published by @EnlightenedBulbasaur about the rarest Pokemon TCG cards can be helpful (a tremendous contribution to the community). If they also meet the condition and demand criteria, they are strong contenders to occupy top 1-5%.