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A month or so ago, my experience in Pokemon investing was the subject of a controversial YouTube video from Reserved Investments, an expert who specializes in Collectible Finance. The story I shared with him was my experience in dabbling in collectible investing for the last 3 or so years.
In 2022, I invested in TCG booster boxes of Pokemon, Magic the Gathering and Flesh and Blood. At the same time, I’d also invested in the stock market. The email I wrote him was my analysis of this experience and sharing how the lessons I learned from his videos helped me.
My main point was, I did well over a 3 year time horizon in Pokemon and did not do well in Magic or Flesh and Blood. But over this time horizon, Pokemon performed about as well as the single stocks I invested in (Google and Amazon) and my S&P 500 index funds well outperformed Magic and Flesh and Blood. And while Pokemon performed well, it required my labor to cash out and give up the opportunity cost for other investments that have better underlying values like cash flows, interest and dividends.
It was controversial in the sense that in the comment section, many people who believe Pokemon is the “end all be all” financial investment cannot handle a perspective that is different from their investment thesis. The high degree of risk in investing in collectibles prompted me to write this to help others looking to enter the collectibles market as a means to diversify from other asset classes.
Those who are vocal about alternative investments tend to be underinvested in traditional assets like stocks/index funds and real estate. Collectibles are hyped as a get rich quick scheme, cherry picking the massive returns when compared to the S&P 500. In reality, collectible investing carries such outsized risk of losing money that is all concentrated into one asset.
All this doesn’t mean it’s a bad idea to invest in the collectibles that you love. Just do it with a plan. Collectibles are a highly attractive, high risk and potentially highly profitable area for investment. The basic idea is investing in something desirable, rare, scarce that has the potential demand to increase in value over time.
Things like coins, comic books, trading cards, sports cards and video games. For example, a rare Carson City Morgan Silver Dollar can go from $500 to $5,000 depending on grade, toning, etc. Same can be said for a Pokemon Base Set Charizard or Amazing Fantasy 15 comic book (first appearance of Spider Man). These are considered a good collectible investment, due to their relatively scarce and desirable nature. Other examples like modern Pokemon and Magic the Gathering booster boxes, graded video games, Funko Pops, have a greater degree of risk since they are generally manufactured scarcity. At the end of the day, the only value collectibles have is based on nostalgia and desirability. There is no other “value”, per se.
Condition also plays a vital role in collectibles as well. A damaged Base Set Charizard card is much cheaper than a perfect PSA 10 Base Set Charizard. Condition is a critical feature. Another risk in collectibles is they are fragile and the elements are even a risk to your investment. For example, a roof leak in the closet can potentially cost you your investment if it damages sealed booster boxes or non-graded comic books.
When deciding to invest in collectibles, consider these 3 tenets as “collectible investing theory”:
- The Greater Fool Theory
- Optimal Investing Grade
- Short term gains > long term potential
The Greater Fool Theory
The greater fool theory is when someone (the lesser fool) buys a speculative asset with the hopes there is a buyer (the greater fool) that will buy it from them at a higher price than what they paid.
For example, Pokemon Sword and Shield booster box prices are soaring right now. In 2022, I bought some of these booster boxes for an average price of $99/box. For about 18 months, the prices for these boxes stagnated while they were still in print from The Pokemon Company. Once they went out of print, the price for these boxes slowly rose. In the last 6-9 months, these boxes would go from $120/box, to $160/box, to $200/box to this month as of January 2025 $300/box. At $300/box, these boxes were still flying off eBay in sold listings. Once I could at least double my money, I began selling on the way up, up to $300 for a box.
In this example, I am the lesser fool and the buyers are the greater fools. I believed in the investment potential and took the risk. After 18 months (and several S&P 500 all time highs), I sat on them, thinking “oh what a waste of money.” Eventually, due to being out of print and a renewed Pokemon TCG boom, I was able to cash out at an average price I was happy with. Now, the high risk is on the buyers of these boxes. They are buying them at double and triple the price I paid, betting that there is a greater fool to buy from them. At the price they paid, they are taking an increased risk than what I took investing in them.
Optimal Investing Grade
The optimal investing grade is a concept from rare coin investing that is used in other graded collectibles areas. The best investment in a graded collectible is not the highest grade, but at the grade where the item takes a considerable jump in price to get to the next higher grade.
The image above are the prices for a Pokemon Base Set Unlimited Charizard. The optimal collecting grade is when there is a significant price jump from one grade to the next. For example, It is not a good investment to purchase a PSA 7 Charizard, because the small upside it has compared to a PSA 8 is only $200. The PSA 8 to 9 looks attractive, as it more than doubles in price. But look at the PSA 9 at $1,537. PSA only grades in whole numbers, so look at the PSA 9 to PSA 10 (or even BGS and CGC 10). That big profit multiplier shows a PSA 9 is the optimal collecting grade. Meaning, if the Base Set Charizard became hot or over the long term, less people can fork over the $9,000 if they wanted to own a high grade Charizard. But more people can pay for a PSA 9. The PSA 9 has more runway for price appreciation than a PSA 10. You also might think a PSA 8 follows this principle, but the risk here is there are so many PSA 8 Charizard in PSA’s population report. The price may not appreciate as well as a PSA 9 due to there are so many of them.
Short Term Gains > Long Term Potential
Profiting from short term gains is usually better than holding out for higher long term profits in some collectibles. I described how I sold my Pokemon Sword and Shield booster boxes on the way up, meaning I did not hold them hoping for 10x in value, but once I was able to double my money, I began to take profits. This is the principle in action. The ability to sell these boxes and roll that profit something else in the long run is most likely the best approach than sitting on the booster boxes for the next 20 years hoping for it to fund my retirement. We don’t have a crystal ball and don’t know what Pokemon will be in the next 20 years. Today’s booster boxes could be worth thousands of dollars, but they could also fall out of favor and be worth nothing.
Sports card investors in the 1990s in the junk wax era can attest to this. The frenzy was euphoric and eventually the market bottomed out. Even 30 years later, the sports cards booster boxes that were hoarded as investments have not appreciated. In general, sports cards are a strong, viable collectible investing category. But no one really cares about 90s era sports cards.
Ask Beanie Baby investors. They thought Beanie Babies would fund their retirements or kids’ college funds. If they had cashed out during the 90s Beanie Baby boom, they would’ve been better off than they are now, because no one gives a shit about Beanie Babies in 2025.
Following these 3 collectible investing tenets are a good way to hedge risk and invest in collectibles with a plan. Other rules I follow are:
- Have a realistic exit strategy in mind. If the price doubles or triples in value, will you sell and take profits? Where would you sell them? Have a plan on where you will sell and account for shipping, fees, etc. If your hopes are pegged that they will be 100x in value, the odds are against you. If the product tanks in value, at what price are you willing to cut loose and sell at a loss? Will you ride it to $0?
- Don’t invest in collectibles until you have a 3-6 month emergency fund and at least $100k in traditional investments, like stocks/index funds. It’s just not wise to invest in collectibles when you have no financial foundation. Don’t YOLO a $1000 life savings into Pokemon booster boxes, save it for an emergency.
- Alternative investments should not be more than 10% of a total investment portfolio. For example, if total investments are $120k, a maximum of $12k is a reasonable allocation to alternative investments (collectibles, cryptocurrency, precious metals, etc.) If any of those went to $0 tomorrow, it’s all okay. It might hurt, but you’d be okay.
Collectibles can be a fun and profitable venture when following certain fundamentals. What do you think of investing in collectibles?
