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Three tips from well-known investor Peter Lynch
Buying up sports cards as an investment has been compared to buying stocks many times over, yet we still fail to seek advice from an industry that is based on the exact premise we all hope to achieve: “to invest is to allocate money in the expectation of some benefit in the future.”
While I can’t promise anyone a sure-fire way to avoid losing money in this hobby, there are a few trends starting to emerge that are concerning. By leveraging a few lessons from “legendary” investor Peter Lynch, we can all bring awareness to common investing traps that are starting to rear their ugly heads in the sports card market.
“It seems like every card posted on Instagram is undervalued.”
I’ve been trying to track down the original post to attribute this properly, but when I saw this comment on Instagram recently, it caught my attention. If you create an Instagram account and start following accounts related to sports cards, you’re bound to be flooded with posts about various cards being undervalued. Some have better arguments than others, but there are also those who are completely misinformed when offering investment advice.
For example, I noticed someone made a post about Michael Thomas Prizm Silver rookies as an investment target. When I commented on the post and said that all Michael Thomas Prizm rookies were refractors, he responded by thanking me because he didn’t realize that. He didn’t remove his post, though.
What’s interesting is that those cards have gone up in value quite a bit since then:
But even in some of the listings, it appears obvious that some people aren’t aware of this fact. I’d be willing to be that some people who are paying over $150 for these cards aren’t aware that all base cards for 2016 are refractor cards.
This is where you are going to run into trouble. While Michael Thomas is one of the best in the game and has a shot at a Super Bowl run with the Saints, if you’re buying under the premise that these are short-printed silvers, you could be in trouble down the line.
Do your research
Peter Lynch’s stock investment advice boils down to two simple principles:
- Do your research.
- Know what you own and why you own it
While there’s much more to investing than those three pieces of advice, people still tend to ignore those fundamentals. The following snippet of Lynch’s wisdom is something all sports card investors need to remind themselves in our social-media-driven world:
“People hear a tip on a bus on some stock, they’ll put half their life savings in it before sunset. And they wonder why they lose money in the stock market. And when they lose money, they blame it on the institutions and program trading. That is garbage. They didn’t do any research. They got a piece of junk.” – Peter Lynch
It’s very easy to get caught up in the hype and make a purchase without fully thinking it through. I’ve done it myself and know others have as well. If you end up buying a card after seeing a post on Instagram or another social channel without first reading up on the player, the team, the upcoming schedule, the population data of that card-set, the pricing of the card (and trends) and the pricing of comparable players, you’re creating more risk in your investments.
Whenever someone tells me they want to invest in sports cards, I tell them to spend at least 40 hours doing research before buying their first card. This lesson in research isn’t the silver bullet to avoiding losses as we are all at the mercy of the market, but it can help you avoid mistakes in the long-run.
GRADED NBA CARDS ON EBAY
Know what you own and why you own it
“And the single most important thing to me in the stock market, for anyone, is to know what you own. I am amazed at how many people own stocks, they would not be able to tell you why they own it.” – Peter Lynch
Sometimes, I’ll walk into a professionally-owned card shop and spot a card that’s severely underpriced due to recent market movement. Other times, someone suddenly does a buy-it-now on a card I let sit for months, not realizing it’s appreciated in value.
It’s so critical to know what you own, but it can be very difficult. Some card shops own thousands and thousands of cards and personally, if I rip even just one hobby box, it can be difficult to remember what cards I have.
Not knowing what I have has cost me money more than a few times. I now have a spreadsheet of all the cards I own and am careful not to list more cards for sale than I can manage at once. It takes a lot more work to do this but protects me from losing money on my cards or forgetting about ones that have since become much more valuable.
What’s also important, and is grounded in doing your research, is know why you have that inventory.
For example, if you recently bought a Derek Carr Topps Rookie Chrome and the only “why” in your arsenal is because Vegas Dave just invested a pile of money in Carr, you’re going to be vulnerable in your investment. Carr could still have an amazing season and that card will appreciate, but how many times do you expect to get lucky?
One exercise you can do ahead of buying a new card, especially if it’s expensive, is to literally say out loud to yourself why you want to buy it. Is it because of the player? The team? The eye appeal? The low population data? The sport taking off?
Sometimes an investment will sound good in my head, but when I explain it out loud, I realize I either have to scrap it or go do some more research before buying.
People can be wrong in the hobby, even experts. I remember listening to one well-known sports card investor dub Andrew Luck as his top priority investment for Football. Without thinking, I bought and graded two Topps Chrome luck rookies. I never liked Luck and the Colts to begin with, and while it was only $20 or so dollars lost, I could have avoided it.
If you buy cards because of FOMO (fear of missing out), you’re going to be in trouble. Nearly all of my worst investments were because of FOMO.
If you do your research, know what you own and why you own it, over time you’ll formulate your own unique point of view for a particular player or card and can objectively observe and consider advice from the sports card community, protecting yourself from unnecessary loses in your sports card investing journey.
Jon has always provided the community with excellent tips and insight; this article is no different. Research is vital if your ‘investing’ in sports cards, do you have an investment strategy learned from the market you would like to share?
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