I collect hockey and baseball cards. It’s super nerdy, I think it’s fun, and I like ripping open packs of my favorite products to hopefully get something rare and valuable. So because collecting sports cards, or just having a hobby of collecting something, is so vital to my existence, I figured why not write a brief piece of commentary around hobby collections and the merit of such collections being a part of your overall investment portfolio or assemblage of assets.
Everyone has a hobby of some sort. Some have hobbies that involve collecting things like coins, sports cards, or sadly enough, rocks. These collection items are typically material items with value. The premise behind most “collection hobbies” is to collect items of value and hope for the value of those items to increase over time, just like you would expect from a long term investment. A lot of what hobbyists collect are of speculative value when they are first acquired, and hope for price appreciation over a period of time due to increased rarity, prestige, and status of that item.
Don’t get me wrong… some hobby collections do carry significant value and should be treated as an asset itself. However, in some ways, I like to think of hobby collecting as a glorified version of gambling, and lot of what hobby collectors are doing is glorified gambling. I say this because the mentality of many collectors is that you purchase things in the “hope” of getting something of value that is more than what you paid. The whole essence of “hope” is what makes it gambling. You aren’t investing in a company with actual assets that produce continuous increasing profits year over year. Investing in a number of companies in a diversified portfolio isn’t gambling.
Admittedly, hobby collections can get quite addictive, where someone is always spending money in the hopes of uncovering a gem. You see this all the time on those goofy TV shows like Storage Wars where people bid on storage containers and hope that the vault contains items of a cumulative value that exceeds the purchase price of the storage unit. Majority of the time, this is not a sustainable way to “invest” or produce returns, as you will get very few winners and a whole lot of losers. TV also makes it appear way more profitable than reality.
Card collecting is no different, and many collectors spend ample amounts of money in the thrill of the hunt to pull the autographed super rare rookie card they’re looking for. The sports collectible market is a multibillion dollar industry, with only a few players in the market that essentially hold a monopoly. Companies like Upper Deck and Topps have huge market share in the sports card markets, specifically Hockey and Baseball respectively. Based on the results from a Blowout Cards survey that looked at 125 different respondents, the consumer market for sports cards is comprised mainly of middle aged adults, specifically in the 30 to 40 range, as seen in Figure 1. This isn’t your typical scenario of a dad buying his kid a few packs of Tim Hortons hockey card packs with his large double double and maple leaf donut. Here’s a fun fact… the average age of a coin collector is 60 years old according to Coinage Magazine.
Figure 1: Age of Sports Card Collectors
Given everything that I’ve said so far, however, some hobby collections can be considered as investments that can appreciate over time. Therefore, something else to consider when collecting items of value is insurance. If items that are being collected are of significant value, then think of these as additional assets on your net worth balance sheet, just like your car and your house. Like a house and a car, you may find yourself having to insure these items to protect them in the event of theft, fire, or flood. You will be paying a monthly insurance premium just like you would do on your car. Home insurance doesn’t cover contents such as collection items by default. Consider storing some of these collection items of significant value in a safe instead of in the open unprotected. It may feel a bit goofy storing an encased graded rookie card inside of a safe, but this piece of cardboard inside a plastic case is essentially a brick of money, and you would never leave a brick of money unconcealed in the open and unprotected.
Gambling or trying to “hit big” takes away from the essence of collecting something as a hobby, and if you are only trying to win the lottery or hit big, then chances are you will spend more money trying to discover that special card you are looking for than what that card is wroth. Some collection items can in fact be considered as investments, and should be treated as another asset that you own and has value. At the same time, be responsible with your hobby collection and don’t mistake the entertainment expense of collecting something as an investment venture. Having something of value is very different than spending money trying to obtain something of value. Spend enough and you will pull that gem you’ve been hunting for, but you might find yourself in debt up to your eyeballs by the end of your pursuit.