GenZ is Investing In Collectibles & Culture: But How Do Sports Cards, Pokemon & Vinyl Stand Up to Stocks?

The return on investment (ROI) among collectibles over the last 3 years has been mixed. Some collectibles have outperformed the stock market, while others have certainly paled in comparison. With the current volatility in the market and an expectation that the market will continue downward for some time to come, many investors are searching for alternatives, and for good reason.

One of the best performers in the collectibles market over the last 3 years: rare coins. The Professional Coin Grading Service (PCGS) reported that the average price of a rare coin increased by 20% in 2021. This still lags behind the 26.6% return of the S&P 500 index, and it’s worth noting the same S&P index fell by 19.44% in 2022.

Another strong performer in the collectibles market has been fine wine. The Liv-Ex 1000 index, which tracks the prices of the 100 most expensive wines in the world, increased by 24.6% in 2021. 2022 was a strong year for wine prices compared to the stock market, wine was mostly flat while the market took a dive. Fine wine is a diminishing asset that requires long-term storage, a comparatively low volatility investment in turbulent economic times. 

As a cultural phenomenon, wine as an investment is even more promising because the investor demographics are trending ever younger. This is partly attributed to apps and other transactional digital platforms as well as the proliferation of high-net-worth individuals. There’s a whole new generation of wealthy wine buyers. 

However, not all collectibles have performed in recent years. For example, the price of baseball cards has been on the decline. The Beckett 5000, which tracks the prices of the 5,000 most valuable baseball cards, decreased by 8.5% in 2021. 

Buying & Selling Collectibles as Investments

The performance of collectibles can vary depending on a number of factors, including the type of collectible, the condition of the collectible, and the demand for a given item or class of collectible. Investors must do their research to understand the risks and potential rewards before making an investment.

Some collectibles, such as rare coins and fine wine, tend to hold their value better than others, like baseball cards and Beanie Babies. The condition of any collectible is important, and in some verticals like sports cards, condition and rarity are almost equally important. Because, in the modern era, sports cards are produced at scale and there is a long-standing collector market. A rarity in such an established collector market is - well - quite rare. 

For example, the 1952 Topps Mickey Mantle card is worth millions of dollars today, predating the development of the collector market, there are not a lot of ‘52 Mantle cards floating around. Meanwhile, the 1990 Upper Deck Ken Griffey Jr. rookie card is worth a fraction of what it was worth in the early 1990s. So many were saved and treated with care. 

In contrast, Pokémon cards have actually held their value, and in some cases, increased in value. Some of the most valuable Pokémon cards include the 1999 Pokémon Pikachu Illustrator card, the 2001 Pokémon Charizard 1st Edition Holo card, and the 2016 Pokémon Shining Rayquaza card. These cards can sell for thousands or even millions of dollars.

The value of Pokémon cards has been on the rise in recent years, due to a number of factors, including the popularity of the Pokémon Trading Card Game, the release of new sets of Pokémon cards, and the increasing interest in the Pokémon brand through multiple generations spanning 23 films from 1998 through 2020.

When you sell a collectible, you will typically have to pay a seller's fee to the auction house or dealer. This fee will eat into your profits. Understanding the fees is part of the due diligence process collectors must undergo ahead of investing. 

Famous Frauds in the Collectibles Market

These are just a few examples of the many frauds that have occurred in the collectibles market. 

The Baseball Card King: In the 1980s, a man named Barry Halper claimed to have the largest collection of baseball cards in the world. He sold his collection to a group of investors for $50 million, but it later turned out that many of the cards were counterfeit.

The Hobby Shop Scam: In the 1990s, a number of hobby shops were caught selling counterfeit sports cards to unsuspecting customers. The shops would often buy counterfeit cards from overseas and then sell them to customers at inflated prices.

The P.T. Barnum Collection: In 2005, a man named James Hyland claimed to have found a collection of rare P.T. Barnum memorabilia. He sold the collection to a museum for $20 million, but it later turned out that much of the memorabilia was fake.

Vinyl as an Investment

Vinyl records have seen a resurgence in popularity in recent years. As a result, value has increased. If you're looking for a potential investment, vinyl records could be a good option right now. 

Examples of records that fit the criteria for collectibility include early pressings of classic albums, limited edition releases, and records that are signed by the artist.

Of course, there's no guarantee that any particular record will increase in value. However, if you do your research and buy wisely, vinyl records could be a good way to invest your money. Of course, they also have the added benefit of entertainment. 

Conclusion

There is a place for any of these cultural and collectible assets in a well-rounded portfolio, especially while the stock market outlook is volatile at best, and very likely to trend downward for some time. 

There are unique concerns between these markets, all of which require extensive research to overcome, because these are considered legacy collector markets, meaning that transactions are more likely to be impacted by emotional factors that far exceed any typical levels of marketplace sentiment. 

Investors looking to diversify away from the stock market, bonds, mutual funds, ETFs, and the usual instruments should also consider private investments in markets with some greater utility. A savvy collector can make money transacting in collectibles but a baseball card doesn’t pay you rent. Now that the private investment markets have been democratized through deregulation, it’s worth doing some research in the commercial real estate space or even the fine art world where diversification is being built in by financial instruments that enable fractional shares, which all solve some of the illiquidity concerns outlined above. 

NOYACK offers an ever-growing range of investment reports in this market as well as the Noyack Investing Club (NICL), to be your guide to the private investment universe. We decode, uncover, explain, and support a community centered around building your optimal 30% allocation to private investments aka alternative investments. 

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