Ideal Sports Card Investing Portfolio (Diversification and Allocation)

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Ideal Sports Card Investing Portfolio

Sports cards continue to make international news, whether it be a rare option featuring Los Angeles Lakers star LeBron James which recently sold for a record $1.8 million at auction or the ever-increasing price of any Fleer ‘86 Jordan RC.

It’s little wonder they’re seen as ideal investment pieces, especially as the market itself has been on an upswing over the past two decades.

In essence, there are two main aspects to consider with any sports card. The condition, and the rarity. A perfect mix of the two is the main reason for high prices, and they tend to be some of the best investment pieces overall.

30 Second Article Summary
+ Certain Sports Cards can beat stock/mutual funds/ETFs returns
+ Diversification is needed just like investing in stocks
+ Conservative portfolio is recommended but other options exists
+ Tracking your card investments are a must

For most collectors, sports cards are seen as a matter of prestige, or it scratches an itch for anyone who has a compulsive urge to complete sets. For investors, it’s solely about maximizing profit, so a data-driven approach could see improved results in the long run.

Here is everything you could possibly need to know about sports card investing, specifically focusing on diversification and allocation.

 

Why are sports cards a good investment?

Sports Card Investing Portfolio
The 1951 Mickey Mantle Bowman card #263 is one of the best investments in not only the card hobby but investments period.

Sports cards have been seen as a great investment piece for over 50 years. Some of the most expensive options are pre-war, but the 1980s and ’90s helped to fuel the industry take-off, with colorful sets packed with some of the greatest players from the time.

In terms of examples, the MJ card listed above helped to kickstart interest in the hobby again, while sports leagues had up to five trading-card licensees. It’s a world away from “exclusive” trading-card deals with just one card manufacturer seen today. (NBA and the NFL are partnered with Panini America; Upper Deck has the NHL license and Topps handles MLB.)

Pro Tip: 99% of cards are not worth investing in

Modern cards feature rare parallels and low print runs, while the overall increase in quality is undeniable. Older options are more stable from an investment perspective but have still risen significantly over the past ten years. 

Take a player like Michael Jordan. If you solely invested in his rookie card/sticker a decade ago, you’ll be seeing astronomical returns in the present day. Even a couple of years would see a significant difference in value. 

A PSA 10 copy of the 1987 Fleer Michael Jordan #59 sold for roughly $2000-$3000 in 2018, while the same card goes for anywhere between $7000-$9000 in the present day

Essentially, sports cards are more stable than many traditional investment options, such as stocks, currency, or even precious metals. An example would be how the card market has been largely unaffected by the outbreak of Covid-19.

If anything, sales have only increased since February 2020, especially as people are forced to practice social distancing, and spend more time at home on average. 

The rise of the internet has also helped to increase interest, as it’s incredibly easy to buy and sell cards using auction sites, social media, and everything in between. Essentially, there’s no better time than the present if you’d like to sell cards, or to get started with the hobby if you want to make money.

 

The need for DIVERSIFICATION when investing in sports cards!

Put simply, diversification is the act of varying your range of investments to avoid potential pitfalls
Rather than dumping all of your money into one specific player or card, you’ll be spreading it across a number of different markets within the hobby.
We’ll discuss how and why you would do so below.

 

Diversification: Examples 

If you’re starting from scratch, it’s tough to know who to invest in, but also how to spread your money between different players, or even sports.

Why would you want to do so in the first place, if you’ve already identified a player, card or set which seems to be making money in the here and now?

Well, there’s no accounting for the future, whether it be an unexpected fall from grace or a loss of form. It’s difficult to plan ahead, and some situations are unforeseeable.

One common method of diversification is to split between bonafide Hall of Famers, and first and second-year rookie/prospect cards.

The HoF players/cards will be on the more stable end, while rookies are going to be volatile, which will become apparent if you’re tracking ROI data over time

Let’s start with more established options. Take the 1989 Upper Deck Ken Griffey Jr. rookie card, which contains one of the more popular images associated with the hobby. The three major grading companies have now examined nearly 120,000 copies, and one-third of those have been rated mint, gem mint, or ‘pristine’.

Despite the large number on offer, the price isn’t expected to dip. In fact, they’ve gone up markedly, from an average of $300 in 2017 to $1,700 today when looking at PSA 10 options. We’ll list more HoF options below:

  • HoFs: These tend to be the classics. Cards like Mike Trout’s 2011 Topps, the Jordan Fleer listed above, or RCs featuring the likes of Wayne Gretzky, Tom Brady, LeBron James, Babe Ruth, or Ty Cobb are just some of the options that should be considered – each is the GOATs in their respective sport, while the older cards are some of the most valuable in existence
  • Rookies: Current options include the Zion Williamson Prizm, Luka Doncic’s Panini Opulence card, or an RC featuring Juan Soto or Ronald Acuna Jr. – Basically, anyone likely to become a Hall of Famer, or in amazing form during their rookie year
  • Prospects: Players like Wander Franco, Jasson Dominguez, and Alexis Lafrenière are some of the best from the current crop of prospects, so it’s worth looking at their cards to see if there’s profit to be made  

 

Of course, these are just a few examples, and you’ll be able to mix and match accordingly based on your tastes, as well as your budget. There’s arguably more profit to be made if you can identify a lesser-known player or a specific RC/prospect card that is likely to increase in value.

Pro Tip: Don’t buy raw cards (i.e. cards that are not graded) on eBay as they often never grade at high numbers (i.e. PSA 10, BGS 9.5)

In any case, a mix of the trio is the perfect way to diversify your portfolio, while accounting for the different levels of risk associated with each group of cards.

For example, a mix of 70% HoF, 20% rookie, and 10% prospects is a smart long term play for conservative/moderate investors. For a less conservative investment, consider lowering the rate of HOF players to 50%, and up rookies to 30%, and prospects to 20% for a high-risk high-reward portfolio. 

Example Sports Cards Portfolio
Super Conservative: 90% HOF | 10% Rookies | 0% Prospects
Conservative: 70% HOF | 20% Rookies | 10% Prospects
Moderate: 60% HOF | 30% Rookies | 10% Prospects
Agreesive: 60% HOF | 20% Rookies | 20% Prospects
Super Agressive: 50% HOF | 25% Rookies | 25% Prospects

We suggest either the conservative or super conservative approaches… aggressive can be very lucrative but be ready to sell off a lot of prospects for less than you bought them for (i.e. prospects busts).

You’ll have to find the right formula for your personal appetite, as well as the players you’ve chosen to invest in. 

 

Card Grading

psa vs beckett vs sgc
PSA, BGS, and SGC are the main three graders we use (if your thinking about getting your cards graded read this first: “Should I get my card graded?”

Whether it be PSA, SGC, BGS, or a new up-and-comer, grading is of the utmost importance when looking at sports cards. Essentially, these grading services work to identify the overall condition of a card, focusing on everything from the surface and corners, to how well centered it is. 

It can be time-consuming if you’re sending your collection over to be slabbed, but there’s no denying that it’s worth it in the long run. Prices for graded cards vastly exceed ungraded versions, even if they appear to be the same on the surface.

As such, we would strongly recommend looking at high-grade options whenever possible, since they tend to make the best investment pieces. For older cards, PSA is normally the preferred service, while BGS is great if you’re on the market for more recent releases. 

For a more detailed overview of grading, you can check out our in-depth guide; PSA Grading vs Beckett Grading vs SGC Grading.

*It’s also worth noting that some collectors see grading as an unnecessary addition to the hobby, and one that is also costly. However, it does give owners and buyers a better idea of the exact condition of the card, which is extremely helpful if you’re making a purchase online. 

 

Further investment strategies 

It can be tempting to stack your portfolio with one specific player. As we’ve noted above, RCs featuring the likes of Michael Jordan and Ken Griffey Jr. have risen rapidly in price over the past few years, and anyone who held onto a copy (or five) is likely to have seen a significant profit. So, why not invest in a card like that, as many times as possible?

This strat makes more sense with veteran players or older cards, but it’s extremely risky if you’re going all-in on a prospect who could easily break their leg in a week’s time.

Diversification will help to lower the overall risk, but there’s always a chance that it could all go wrong.

Remember; for every successful card, there are scores that have depreciated for some reason or another. Consider your favorite rookie from a few years ago or any hyped starlet who struggled when they reached the big leagues. More often than not, they fail at the final hurdle.

Completing sets is a viable investment method if you’re interested in one sport, while you could ‘chase the rainbow’, picking up every rare parallel possible for your favorite RC. Again, the latter is a high-risk, high reward method of investing. 

Typically, diversification will allow for slow, steady gains. It might not be as exciting as sticking with one player, but it’s a safer investment, which is key if your main objective is to maximize your ROI in the shortest time possible.

 

When to buy and sell

Buy low, sell high. It’s common advice for anyone hoping to turn a profit in any market, and it can be that easy in practice. Knowing exactly when to buy and sell cards is a separate matter entirely, and it only comes with experience, practice, and knowledge.

Related: Best Time to Buy and Sell Sports Cards

We’ve already discussed this subject in-depth, but it normally boils down to three differing methods. 

Short-term investments are popular, allowing for a quick flip as you sell cards during peak times during a season. Typically, there’s a good time to buy and sell, depending on a number of factors. For example, NFL cards are always popular, but you’ll see an uptick in prices if you can wait until September to offload your collection. The five-month period between September and January is the best time to sell, matching the progression of the NFL season, and there’s an extra boost during the run-up to Christmas.

Mid-term investments could take a year or so to come to fruition, especially if you’re buying during the off-season, as discussed above. Rather than a quick flip, these are more measured and should be easy to track over weeks and months.

Long-term investments are cards you buy with no intention of selling anytime soon. (The clue is in the name.) Holding almost always proves to be the correct choice, but you’ll have to weigh up the pros and cons, as well as the price being offered at the time. After all, you could always hold a card for ‘too long’, and miss out on the maximum profit.

 

Where to sell is another important aspect to consider. Online auction sites like eBay are always popular, while you can always go to a trade fair or collectors event. For more information, check out; Where/When to Sell Your Sports Cards (Best Card Sellers Guide).

As for when specifically, Sunday night at 10 pm EST tends to be favored if you’re looking to snag a large number of American buyers on an auction site, or you could sell just after a major game if a player has a notable performance.

 

Tracking your investments

Tracking your sports card investments will take time and effort. It’s the opposite of ‘easy money’, but hard work will pay off in the long run. 

An out-of-work law student named Dennis Healy recently made the news, having auctioned a number of rare 1974 Topps rack packs left to him by his late father. While you might not have a secret stash of cards waiting to be found like Healy, it’s worth making a note of the methodical approach he took to selling the collection.

Healy ‘created graphs from his data that showed 1974 Topps rack pack sale prices were at an all-time high, and that the average sale price had jumped 300 percent from five years ago.’

For him, it was a no-brainer. Put yourself in his shoes for a second. Whether you would have sold or held, it’s clear that a data-driven approach ensured that he saw optimal results, and he achieved a price point that was good enough for him to part with the rack packs.

It’s better than a scattergun approach, picking up cards solely because you like them, or because an image of a Zion RC came to you in a dream. 

We’d recommend jotting down the following information if you’re planning to start keeping tabs on your sports cards investments:

  • Purchase date – When you bought the card
  • Card info – Player name, card number, parallel, etc
  • Purchase price – The amount you purchased the card for 
  • Sell price – The amount you sold the card for
  • ROI – The return on investment, if any 

 

It’s worth noting that this is a very basic plan, but it should help you to get underway. Starting is often the most difficult step, but it’ll definitely be worth it in the long run. (If it isn’t, at least you’ll be able to better understand the market for sports cards, and see exactly where you went wrong.)  

A program like Excel or Sheets will do the job, while there’s nothing wrong with a good old fashioned pen and paper! Whatever method you choose, make sure to be consistent in terms of the data you collect. 

*The more data you use, the better equipped you’ll be when it comes time to cash out. You could track recent form or more detailed player stats, or work with a few others to build up a small database, packed to the brim with everything you need to know about the cards you’ve invested in.

 

Accounting for risk

Let’s say you buy a few cards, and earn a decent profit. You’ll likely be buoyed by the experience, and it’s not uncommon to reinvest the money, and maybe even a little more on top. After all, you have to spend money to make money. The thing is, one wrong move could be devastating, especially if you’re throwing in more than you can afford in the first place.

sports card investments
Above: A graph showing how the 1989 Ken Griffey Jr. Upper Deck RC has performed vs the S&P 500 over the years

Take a more traditional market, like stocks. (If you prefer, consider a popular cryptocurrency, such as Bitcoin.) They’re obviously more volatile than a HoF RC, but there are still similar risks that should be accounted for. 

Make sure to set a budget, and never spend beyond your means. An expensive card might seem like a sure thing, but that won’t stop debt collectors from doing their job if it all goes wrong. 

Remember, there’s always a chance that the average value of your portfolio could go down drastically, sometimes through no fault of your own. You can’t account for career-ending injuries, or addictions, or even depression or death in the family. Each will have an impact on a player and the overall interest in their sports cards, whether it be for better or for worse.

Considering the numerous risks discussed above, diversification is one of the best ways to insulate yourself from the worst of it.

 

Allocation vs Diversification 

Traditionally, asset allocation is the way in which you divide the money among major investment categories such as stocks, bonds, cash, or other investments, some of which are going to be riskier than others.

It’s normally based on how much risk you’re willing to take, and how soon you’ll need to see a return on your investment. (We’ve discussed how this relates to the sports card market above.)

Essentially, asset allocation was first introduced as a way to manage risk in the 1950s. Research showed that a portfolio’s risk and expected return was a result of how each investment performed individually as well as how investments behaved together.

By selecting a range of investments that react differently to market conditions—or those that have a low significance to each other—an investor could reduce their overall risk.

Diversification takes this concept further as you spread your money between different types of investments within a specific category. For instance, instead of one stock or currency, ideally, you would have many in your portfolio. Dividing even further, you would have different types of stocks, such as large-cap, small-cap, and international.

It’s easy to see how this can be applied to cards, especially considering the difference between HoFs, prospects, and rookies. The same is true for the sports themselves. 

It may help to incorporate methods that are normally used by traditional investors, as they have a wealth of experience and knowledge that can be drawn upon.

 

Ideal Sports Card Investing Portfolio: Conclusion 

Sports Card Investing Diversification
The 1986 MJ Fleer RC is a card every high-end sports card investor should attempt to have in their portfolio

It’s tempting to look at the hottest cards right now when looking for potential investment pieces. After all, if they’re turning a profit today, they’re likely to do so in the future. However, it’s arguably best to pick up your cards before hype engulfs them, and you’ll see a greater ROI if you can grab them at the ideal time. 

Other Must-Have Cards For Investing Purposes: Mike Trout RCs, LeBron James Autos, Luka Doncic RCs

Back in the ‘70s and ‘80s, it wasn’t uncommon to see sports cards as a supplemental investment, which is one of the reasons why so many collections are passed down in the modern-day. Of course, the irony is that the majority of cards from that era are almost worthless unless you’re looking at pristine sets of unopened packs.

Trending: Best Hobby Boxes To Buy

It pays to be more selective, especially if you’re hoping to safeguard your future or put a little away towards a retirement fund. As with all investments, it’s worth considering the risks, so make sure to take as many steps as possible to minimize any potential issues along the way. 

To that end, diversification and allocation are two great ways to get a handle on what your portfolio is worth in real-time, while there’s always a chance that a selection of the cards you’ve chosen will see similar gains to a Ken Griffey Jr RC, or the MJ Fleer. Mixing between different types of cards should help to see improved gains, and we’d strongly recommend doing so.

Let us know if you have any further questions to do with building up a sports card investment portfolio, or about any of the diversification strategies you’ve come up with so far!

Gold Card Auctions can be reached at info@goldcardauctions.com or visit the Gold Card Auctions Facebook Page… cheers!

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Soy
Soy
3 months ago

Pretty sure Jordan’s rookie is 86. Not 87.