Stocks or Pokemon cards? An introduction to alternative investing

How much money could these tiny pieces of cardboard earn you?

Photo from Shutterstock

Pokemon trading cards are well known all around the globe. These are the little pieces of paper many of us carried while running around the playground so many years ago. What if I told you that many of these cards can fetch astronomically high prices today? Many of these cards and sealed products are being sold for thousands of dollars at various auction houses every day. And like with any coveted collectibles, several millionaires have been born from this children’s card game.

In this article, I address the feasibility of investing in Pokemon cards or other collectibles, as well as what questions to ask yourself when doing alternative investing or any other type of investing. I also introduce several cards that have turned out to be great investments and others that turned out to be big-time losers. Finally, I will explain, step-by-step, why some of these cards turned out to be bad apples and why you should always ask yourself: How many cards are available? who might want to buy them? And when is it time to sell?

Is it possible to invest in Pokemon cards?

Imagine an investor, Barren Wuffett, who decides to buy 20 stocks from Apple. Barren is likely buying these stocks because he expects the value to go up in the future. Some people might disagree with Barren, saying that he should diversify to minimize his risk by also incorporating other stocks, as well as bonds and index funds into his portfolio. Others might even tell him to “go big or go home”, saying he should abandon the stocks altogether and pour all of his capital into Bitcoin and hedge funds.

Pokemon cards are not so different. If you’re looking for slow and steady growth, it might be a good call to buy Base set Charizard cards. This card is by far the most popular and well-known card in the hobby and its value will most likely continue to increase at a steady pace in the future.

Base set Charizard (unlimited). The king of the playground will remember

On the other hand, perhaps you want to spend all your money on the rainbow Mewtwo GX from the (much newer) Shining Legends set. While this card could become immensely valuable in a few years, Nintendo (the company owning Pokemon) might decide to run another print run of this set at the end of the year, which would drive the value of this card into the ground.

Mewtwo GX from Sun & Moon: Shining Legends

To answer the question, yes, you can invest in Pokemon cards, just like you can invest in so many other things. In the end, it comes down to your knowledge about the market. Similar to stocks, you need to know how many cards are available, who might want to buy them, and when its time to sell them.

People often pointed out to me that things like collectibles don’t qualify as “proper investing” because they are not productive assets. These cards do not pay dividends, nor can you use them to build your house on. To quote the trending buzzword, these non-productive assets might not be able to create value. I confess that this is a valid concern.

However, I believe that, in addition to there being ample opportunity for financial gains, investing in collectibles can also lead to value creation in its own way. For instance, one could decide to ship off high-quality cards to be graded. Companies like PSA will then award the card with a grade between 1 and 10. A card that has been deemed worthy of receiving a 9 or a 10, is significantly more valuable than the regular, ungraded version of that card. Having said that, grading can be a long and tedious process, which explains why many people prefer to buy already graded cards. Being the middle man who finds cards in good condition, sends them off to be graded, and subsequently selling the graded card in an auction is one of the many ways to create value.

PSA 10 Base set Charizard (unlimited)

What returns can I expect from investing in Pokemon cards?

Unfortunately, I do not have a crystal ball. It’s impossible for me to tell you what kinds of returns you can expect. What I can do, however, is show you what returns our predecessors have made. Keep in mind that, like with any sort of investing, there is risk involved in each purchase and there are always winners and losers.

Let's start with some good news and look at some winners. The vast majority of older cards (between 1999–2003) have tremendously grown in value, and many will likely continue to do so.

Let us once more look at the coveted base set Charizard card. I ordered a few of these cards online at a large card reseller, Troll & Toad [1], in 2013. Looking at my old receipts, I paid roughly $12.30 per card. If I were to order that same card at the same shop right now, it would cost me $295.99.

Another example of “go big or go home”, is the Pikachu Illustrator card. To provide some background, only 39 of these cards were ever printed. They were only awarded to the top contenders CoroCoro Magazine Pokemon Illustration contest, which took place in select regions in Japan, 1998.

Scott Pratte, a well-known Pokemon collector bought multiple copies of the cards for roughly $20,000 each in 2009. In October 2019, a copy of these cards was sold at Weiss Auctions for $195,000 [2]. Currently, one of Pratte’s cards is available on eBay for a whopping $2,000,000. While this certainly does not mean the card is now worth $2,000,000, It is safe to say Pratte made a solid investment [3].

PSA 9 Pikachu Illustrator

While several of these cards have multiplied in value many times since their initial release, we also have to consider the side of the losers.

Starting off with a smaller scale example, a collector bought several copies of a Keldeo EX card from the Boundaries Crossed set released in 2012. These cards would fetch roughly $40 to $50 shortly after the set was released. Today, almost 9 years later, many copies are sold at card reseller stores and eBay for $10 to $15 dollar.

Keldeo EX from Black & White: Boundaries Crossed

Another group who lost big-time comprises the people who decided to buy a Raichu prerelease card. This card was printed around 1999 by the Wizards of the Coast (Pokemon’s parent company before Nintendo bought the rights) as a “test run” [4]. For years the Wizards of the Coast denied its existence until a former staff member publicly released pictures of the card, claiming he had this card in his possession and only 8 to 11 copies of the card were ever produced. Less than a year later, the former Wizards employee sold his Prerelease Raichu for more than $10,000. Unfortunately, it later turned out that the estimate of 8 to 11 copies was completely bogus, and that the actual number of copies could very well exceed 100.

Prerelease Raichu

It is important to note that these poor investments could have been avoided with the right strategy. In this next section, I will discuss how bad investments can be clearly differentiated from the winners.

How to invest in Pokemon cards? Should I be doing this?

The number one most important thing when investing in Pokemon cards is to know your market well. Extremely well. As I mentioned before, always ask yourself: how many cards are available? who might want to buy them? And when its time to sell them? These are the simple, yet fundamental questions you need to ask yourself when investing in anything, as they address the laws of scarcity, demand, and supply.

The collector who bought the Keldeo EX cards failed to realize two things. First, one of the reasons it was so popular was due to the fact that it was one of the first full art cards, meaning it was in short supply and many people wanted to get their hands on this beauty. He did not, however, take into account the fact that Nintendo was printing more cards than ever before, and many more full art cards would be available shortly after the Keldeo’s release. Second, the price of the card was initially further driven up because it was a card competitive players wanted to use in their decks to battle others. Naturally, the card’s value plummeted when stronger cards were released.

the buyer of the Keldeo cards did not take into account the fact that Nintendo started to print more cards, nor did he consider why people might want to buy this card in the first place. In the end, a simple analysis of the card would have revealed the pattern of gradually increasing supply, with a falling demand over time.

What about the Prerelease Raichu card? Surely this must have been a sought-after card in limited supply? While that is certainly true, the investor in this scenario did not ask himself the first fundamental question: How many of these cards are available? Purchasing a Prerelease Raichu is inherently risky because the information available regarding the number of produced cards is unverifiable. When you buy a pack of cards in the store or win a card at a competition, a public record is made available of the number of cards that are printed and awarded. The only piece of information available about this Raichu was a dubious claim from a former employee (from a company that does not own Pokemon anymore nonetheless) that stood a lot to gain from fabricating this story.

Always ask yourself: how many cards are available? who might want to buy them? And when is it time to sell?

These are also precisely why the Charizard base card and the Pikachu Illustrator were different.

The Illustrator card was only awarded in small, verifiable quantities 22 years ago. It is a scarce and rare card with a rich history, which also features Pikachu (one of the most popular Pokemon) with a very unique art style that has never been released again. We know how many cards are available. We also know that many collectors would be interested in buying this card, not only due to its extreme rarity, but also the long history behind this card. Similarly, the Base set Charizard card has been out of print since 1999 and it is regarded as the most popular card in the Pokemon Trading Card Game franchise.

Coming back to the question, should you be investing in Pokemon cards? The answer is, it depends. To buy and sell cards in this hobby you know the market. And when I say that, I mean you need to know the market. What is the history of the card you want? How many are there available? Are you buying the card as a short or long term investment?

Naturally, the best way to explore the market is a genuine interest in the cards. If you couldn’t care less when the Japanese Grand Party promo card was released and how people could acquire it, these cards are probably not for you. That being said, I believe the principles laid out in this article are valuable in any investing endeavor.

Does this mean I should simply buy any cards that are out of print?

It is important to note that this does NOT mean that you should simply buy any old that you can find at market price. We would know the number of cards that are available and that these cards are in high demand. While this is fantastic news, there is still one critical element missing. When is it time to buy/sell a particular card?

To illustrate the buying old cards is simply not enough, I will share some of my own insights. One of the most valuable sets, named Skyridge, was released in 2003. When Pokemon card booster packs hit the stores, you can buy them for roughly $5. The older packs, however, sell for much more now. The booster packs of the Base set mentioned earlier sells for roughly $150, while a Skyridge booster pack sells for an impressive $650.

Skyridge booster pack: Vaporeon art

Crystal Charizard holo version from Skyridge

You might think it might be a great idea to stock up on Skyridge booster packs. In fact, many people are doing just that. However, on closer inspection, there is a large discrepancy in the value of the packs and the value of the cards inside. The Crystal Charizard card, the most valuable card in the set, has been decreasing in value, despite the surge in the prices of the packs. In 2017, a Skyridge pack would cost roughly $350. A Crystal Charizard card would cost around $3,000 to $3,500 (with a PSA 10 grade). In 2020, the Skyridge booster packs and the Crystal Charizard are sold for $650 and $2500 respectively [5]. This is a large gap in value that you should not see. If the price of the Charizard (among others) falls, while the sealed set itself becomes ever more expensive, it is likely to come crashing down at some point.

I hope you have a clearer view, not only of the history of Pokemon cards but also the about the questions you should ask yourself when engaging in alternative investments, and any type of investment for that matter. Always ask yourself: how many cards are available? who might want to buy them? And when is it time to sell? If you enjoyed this article, please do let me know by upvoting or dropping a comment. I am always happy to write about particular questions or concerns people might have and I hope to write more articles on this topic in the near future.

-AR