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Last Updated On: September 14th, 2023
With over twenty years of experience buying sports trading cards, there are several principles I have followed to minimize risk and avoid losing any real money.
The following tips are equally important in selecting consistent winners and steadily watching the value of your collection increase over time. And they apply to collectors just as much as sports card investors.
1. Buy Legends (or soon to be HOFers)
Easily one of the most important principles when collecting or investing in sports trading cards is who you choose to buy.
My entire collection is primarily built around hall of fame players, potentially top 5’s in their respective sport, or close enough. Names like Michael Jordan, Lebron James, Kobe Bryant, Kevin Durant, Mickey Mantle, Mike Trout, Stephen Curry, and Tom Brady.
A very small subset of my collection is invested in speculative players. I’d estimate around 5% of the net value of my collection is in up-and-comers such as Luka Doncic, Zion Williamson, and Donovan Mitchell. Even Giannis Antetokounmpo was on that list until he crossed over into a top tier player now that he has 2 MVPs, a defensive player of the year award, and a championship. Translation: it’s much safer to buy Giannis now!
The reason for buying legends is simple: they have developed a resume and a place in history that is irrevocable. Legends cannot un-win a championship, get injured, or undo history or their place in pop culture. The demand for legends will always remain as a result. Speculative players in contrast tend to be in the headlines very often providing catalysts for price movement, however they are prone to all the risks a legend is not.
2. Never Have FOMO (fear of missing out)
The fear of missing out (FOMO) is a real thing. As soon as Devin Booker goes on an epic playoff run, you find yourself searching eBay to buy his rookie card at any cost because you buy into the hype. Similarly, you hear your friends are buying bitcoin and you dive in as the price skyrockets. This is a terrible way to make money.
You never want to buy a player’s card when they’re on a hot streak, for example in the middle of a playoff run or after winning a championship. The disciplined time to buy is when prices are depressed, and when the market isn’t terribly excited about the player (e.g. during the offseason for starters). This way you limit any potential drawdown in price after the hype is over.
3. Think Long Term (and be patient)
Many newcomers to the trading cards industry joined the hobby during the pandemic, where prices were skyrocketing. It’s hard to lose money during periods where everything is going up in price, although really bad habits can be formed beneath the surface.
One of the worst habits a collector can develop is the tendency to only buy cards with a “buy-and-flip” mentality. Essentially you buy a player’s card in anticipation of capitalizing on a short term price increase by selling the card (e.g. during a playoff run, hall of fame ceremony, trade rumors, etc.). While this strategy can work from time to time in an always-up market, it is a very shortsighted view of the market that comes with enormous risk.
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The primary risk of this method of buying is the likelihood of getting stuck with a lot of shitty cards in the event the market peaks, and the prices of your cards go drastically lower in a short period of time. This approach to buying can leave you having to decide whether to sell your speculative cards for a major loss, or hold them for a long period of time when you didn’t really plan to initially. Even worse, if you weren’t buying legends (refer to previous section above), you could see your cards never recover.
The best way to prevent short-term thinking is to buy collectables with a longterm time horizon. For example, when I buy Michael Jordan rookie cards, I don’t expect them to jump in 3 to 6 months where I can sell them to make a quick profit. While it would be great if they did, my primary trigger for buying is with the mindset that I will hold these cards for at least 3 to 5 years, and any fluctuations in short term price mean absolutely nothing to me. This way, I’m able to weather any downturn in price by being patient, especially given I’m not expecting I will need the money I tied up any time soon.
4. Pick Rare(r) Cards
So far, we’ve discussed the importance of buying legends, controlling emotions when it comes to FOMO, and having a longterm mindset.
Another way to minimize risk is to buy rare cards — and the rarer the better. In simple terms: a rare card will always have more buyers than sellers, just for the fact that there will be a very limited number available for sale.
There are many short print or serially-numbered inserts, rookies, and super rare refractors that would qualify as rare. That said, usually I steer away from base cards if at all possible, unless it’s a very high grade and therefore rare in that grade.
For example, let’s say you’re seriously considering adding a 2003 Lebron James Topps Chrome Rookie to your collection. There are thousands of these printed, and many in PSA 10 Gem Mint condition. Typically I wouldn’t bother buying this card (unless I get it under a price I can’t refuse, which is sort of discussed below). If I really wanted a LBJ Chrome RC, I would look for a BGS 10 Pristine or SGC 10 Pristine example, which is much more limited in population relative to it’s PSA 10 counterpart.
5. Set a Max Price (and Stay Under It)
This next tip is a little more abstract, but I find it has been very useful in preventing me from reaching too high for a card I really want, and inherently helps me avoid FOMO.
So what do I mean by setting a max price and staying beneath it? This amounts to just how much risk you take in buying a single collectable / trading card. For each person risk will be based on your own appetite, but one way to determine how to set a maximum is by looking at the entire value of your collection.
Let’s say you have a collection worth about $10,000. You want to be careful not to buy cards that are perhaps more than $500; this equates to about 5% of the value of your entire collection. If the card is well over your maximum, then you simply say you ‘missed it’ and move on.
In up-markets, you may find that cards drastically exceed your maximum risk price often, but if you’re patient, markets ebb and flow and you may eventually get a chance at the card you missed down the road when prices come down or correct. A maximum price is kind of like your north star for managing risk and FOMO. It’s somewhat arbitrary, although it forces you to at least think twice when you find yourself reaching for a card you gotta have.
Obviously if you’re just starting out to build your collection, you could still follow this principle by considering how much budget you plan to set aside for buying sports cards. For example, if you have $2,000 earmarked to buy sports cards, a 5% rule would mean try not to exceed $100 for any given card you’re considering to add to your growing collection.
In Summary
The ideal way to mitigate risk when buying sports cards is to combine all five of these tips together when possible. That said, it is not uncommon to break one of these rules from time to time, especially when you’re buying a super rare card that rarely comes to market or even a speculative player which breaks rule #1 for buying legends. I tend to do the same occasionally, however the more of these principles I follow the better I’ve been able to minimize my risk of losses, and maximize my gains.
Have any questions about any of these strategies? Post your questions below and I’m happy to reply!