The rise of trading cards as an alternative asset class
In August 2022, a 1952 Topps Mickey Mantle trading card was acquired at auction for US$12.6 million, becoming the most expensive piece of sports memorabilia ever sold. This is not an isolated incident of a collector paying whatever it takes to own a rare piece of sports history, as cards featuring Honus Wagner, Stephen Curry, LeBron James, Wayne Gretzky, Tom Brady and others have each sold for more than US$2 million since 2021.
As the investment landscape has seen a growing interest in alternative asset classes, trading cards are emerging as a unique and compelling investment opportunity, offering the potential for significant returns while diversifying portfolios.
Historical origins
The origins of trading cards can be traced back to the 19th century, when the practice of inserting small, illustrated cards into tobacco and gum packs gained popularity. These cards often depicted sports figures, actors, animals and various other subjects of interest. The earliest known trading card set was the ‘Baseball Card Game’, released by the Peck & Snyder sporting goods company in 1863.
However, trading card collecting didn’t gain significance until the rise of popular sporting leagues like Major League Baseball (MLB), National Football League (NFL) and National Basketball Association (NBA) in the mid-20th century.
As time went on, trading cards transcended sports to include other themes like entertainment franchises, historical events and more. This diversification broadened the appeal of trading card collecting to a wider audience.
What drives the value of a trading card?
The value of a trading card is influenced by a combination of factors.
Rarity
Rarity is perhaps the strongest driver of trading card value. Similar to art, collectibles and rare coins, the scarcity of certain trading cards contributes to its allure and potential appreciation in value. Cards with limited production runs, unique variations or special editions become highly sought after by collectors and investors alike.
For example, in April 2021, a 2003 Upper Deck Exquisite Collection Lebron James rookie card sold in a private sale for US$5.2 million. The card, one of only 23 in existence, included both his autograph and a piece of game-worn jersey.
Likewise, in August 2020, a one-of-one autographed Bowman Chrome Draft Prospects Superfractor Mike Trout card was sold at auction for US$3.936 million. As further evidence of the rise of trading cards as an investment opportunity, the same card was purchased for US$400,000 just two years earlier.
Condition and grading
The condition of a trading card significantly impacts its value. As such, cards are usually graded to achieve a professional assessment of a card’s condition, authenticity and quality. Not only does trading card grading offer a systematic and transparent method to determine a card’s value, it also protects it from further deterioration.
A card is submitted to grading companies such as Professional Sports Authenticator (PSA) or Beckett Grading Services (BGS), where experts inspect it for wear, damage, alterations and then verify its authenticity.
The card is assigned a numerical grade on a standardised scale which reflects its overall condition and preservation. For example, PSA and BGS use a scale from 1 to 10, with half-points (eg. 9.5) to provide more granularity in grading. A 10 represents the highest grade (Gem Mint), with 1 the lowest (Poor).
Encapsulation in a tamper-evident case (often referred to as a ‘slab’) follows, preserving the card’s state and preventing further deterioration.
Each encapsulated card comes with a grading report, which serves as a documented record of the card’s assessed condition. Grading reports provide details of the card’s grade, qualifiers and authentication, thereby enhancing buyer confidence, market access and overall value.
Grading benefits investors by providing an objective evaluation, safeguarding cards and enhancing their sale prospects.
Historical significance
Trading cards often carry historical significance and cultural value that exceed their monetary worth. Many cards capture iconic moments, legendary players and pivotal events in sports, entertainment and popular culture. These cards become artifacts of their time, representing a slice of history that resonates with collectors and enthusiasts.
As such, an investment in trading cards allows individuals to own pieces of cultural heritage, making it an investment that combines financial potential with cultural appreciation.
While historical significance may not be a primary motivator for investors, there is no doubt that the higher the status of a moment or player, the higher the value of a card that encapsulates this.
The case of ‘The Commerce Comet’
Mickey Mantle’s nickname, the ‘Commerce Comet’, took on new meaning when a 1952 Topps trading card bearing his name and image sold at auction for US$12.6 million in August 2022. To put this in perspective, across his legendary career which spanned almost two decades with the New York Yankees, Mantle made US$1.128 million in total career earnings. Adjusted for inflation, this is equivalent to US$11.3 million in 2023.
So, why was this the card to become the most valuable ever? The answer is a mix of rarity, condition and historical significance.
Mantle was a seven-time World Series champion, three-time American League Most Valuable Player and was inducted into the Baseball Hall of Fame in 1974. A legendary switch hitter, he is the only player to hit 150 home runs from both sides of the plate.
The card, a 1952 Topps #311 Mantle, is legendary for reasons that transcend the man it depicts. The 1952 Topps were the first modern baseball card set, created by a 28-year-old World War II veteran named Sy Berger. In a tradition which still stands, the set was divided into two series. Series one consisted of cards numbered 1 to 310, with series two numbered 311 to 407.
Series one was a massive hit. However, by the release of series two, the baseball season was drawing to a close, and the mostly children who collected cards had turned their attention to the impending start of the football season. The series two cards, which included the famed #311 Mickey Mantle, literally could not be given away.
Berger, in need of warehouse space, decided to clear out the series two cards. All in all, an estimated 300 to 500 cases of cards, which took three trucks to haul away, were loaded onto a garbage barge and dumped into the middle of New York’s Hudson River. Thousands of Mantle cards (along with cards depicting Jackie Robinson and Pee Wee Reese), each worth a fortune, were gone forever.
Questions have been asked as to whether a dive expedition could be mounted in the slim hopes the cards are still intact at beneath the Hudson.
Fast forward to 1986, where Alan ‘Mr Mint’ Rosen (one of the first people to recognise the appeal of trading cards as an investment opportunity) received a call from a forklift operator who said he had a truck driver friend, Ted Lodge, with 1952 Topps cards for sale. Lodge had inherited a home from his father, who was also a truck driver and had driven for Topps in the 1950’s.
As it turned out, not every case of the 1952 series two cards sat at the bottom of the Hudson River – a cache of them had been stored in the basement of the home Lodge had inherited for decades.
Rosen hired an armed police guard to accompany him to make the sale, paying US$125,000 cash for 5,500 1952 Topps cards, which included dozens of the prized Mantle cards.
Five years later in 1991, Rosen sold one of those ungraded Mantle cards for US$50,000 to Anthony Giordano, a man who would remain anonymous for over three decades. Despite years of million-dollar offers for the card, it took the persuasion of Giordano’s sons to finally come forward, grade the card and sell the crown jewel of his collection.
The card was awarded a 9.5 and deemed the ‘finest known example’ of a Topps 1952 #311 Mantle.
Lending itself to the importance of card condition and grading, according to PSA, card #311 with a grading of 8 or higher will still cost seven figures, but a grade 9 will carry with it a US$4.25 million price tag.
Overall, however, the historical significance of the Topps 1952 series, card #311 and the man it depicts, Giordano’s backstory, as well as the mint condition of this card all worked together to ensure this was the most expensive piece of sports memorabilia ever.
Normal investment fundamentals apply
Just like any other asset class, there are core principles which must be applied prior to making an investment. These fundamentals provide a framework for evaluating investment opportunities, managing risk and aiming for financial success.
Research and due diligence
As with any other venture, conducting thorough research is essential in trading card investing, particularly in terms of understanding market trends, historical data and the factors that drive the value of specific cards. For example, when researching a card for an athlete, due diligence into a player’s performance and overall career potential is vital, as is the significance of the card itself, rarity and demand for it.
Diversification
A well-rounded investment portfolio is diversified to mitigate risk. Incorporating alternative assets like trading cards can achieve diversification across an entire portfolio, with diversification also available across different card categories.
The card Post Malone paid US$2 million for
Firstly, the performance of trading cards is not directly correlated with traditional financial markets, making them a potential hedge against market volatility. When stocks experience fluctuations, the value of trading cards may remain stable or even appreciate, offering a level of protection for investors.
Next, diversification is available across trading cards. Similar to the way in which commercial property has different sectors such as office, retail and industrial, there are many different investment-grade card categories.
Every example to this point has been of a sports trading card. However, in August 2023, musician Post Malone paid US$2 million for a one-of-one Magic: The Gathering card. While celebrity card acquisitions are often inflated, such as YouTuber Logan Paul paying double the estimated value (US$5.275 million) for a one-of-one 1998 Illustrator Pikachu Pokémon card, there is reason to believe Malone’s purchase was different.
Wizards of the Coast, the company behind Magic: The Gathering, announced the one-of-one The One Ring card months before its release. Upon this announcement, a well-known collector offered a US$100,000 bounty for the card, before a collectibles company upped this to US$1 million in June. A week later, a gaming store in Spain offered US$2.1 million to the individual who came across the card.
Ultimately, Malone reached out to Brook Trafton, the man who found the card. The high-profile US$2 million acquisition is the most recent example of the sums certain cards can fetch, particularly outside of the sports sphere.
Market trends and sentiment
It is important for investors to be adaptable to changes in the market. The value of cards can be influenced by shifts in popular players, cultural trends and collector preferences.
Liquidity considerations
The trading card market is not as liquid as many traditional financial markets. While some cards can appreciate significantly, investors must be prepared for the possibility of longer holding periods.
Long-term mindset and ability to time the market
As the trading card market is largely illiquid, successful investing often requires a long-term approach. While short-term fluctuations occur, the value of many cards appreciate over extended periods. This aligns with the principles of patient, disciplined investing, for which the potential for substantial long-term gains exist.
In September 2020, a one-of-one 2013-14 National Treasures Giannis Antetokounmpo autographed rookie card, which includes the logo from a game-worn jersey sold for US$1.85 million at auction. At the time, this was the most expensive basketball card ever sold, surpassing a high-water mark set only six weeks earlier.
While cards for players such as LeBron James – who was told in high school that if he weren’t a first ballot NBA hall of famer his career would be considered a bust – were in demand from the moment he played his first career game, this is rarely the case across the board. Therein lies the long-term mindset required when investing in trading cards.
Giannis Antetokounmpo National Treasures rookie card
For Giannis Antetokounmpo, who the Milwaukee Bucks selected 15th overall in the 2013 draft, success on the court was not instantaneous. In his rookie season, the 18-year-old ‘Greek Freak’ averaged modest numbers across all categories, which improved year-on-year for each of his first three seasons.
It was not until his fourth season that Antetokounmpo became a genuine star, making his first NBA All Star appearance. In the 2016-17 season, Antetokounmpo topped the Milwaukee Bucks in each of the five major statistical categories (points, rebounds, assists, steals and blocks), becoming just the fifth person to ever do this.
In 2019 and 2020, Antetokounmpo was awarded the NBA’s highest individual honour, the Most Valuable Player (MVP) award.
It was the off-season after his second consecutive MVP award that Antetokounmpo’s rookie card sold for US$1.85 million, which goes to show that just like any other investment, it’s still vital to be able to time the market.
Steph Curry making a splash on and off the court
The first funds emerge
The first signs of the legitimate rise of trading cards as an asset class have come from Alt, a company set on transforming investing by unlocking the value of alternative assets. The company offers buying and selling platforms, market trends and tracks the value of specific cards and categories. Perhaps most significant, however, is the launch of two investment vehicles.
The second fund from Alt, the aptly named Alt Fund II, is anchored by a 51% stake in a one-of-one 2009 Stephen Curry Rookie Logoman Autograph card. As the card name outlines, it contains an autograph from the prolific three-point shooter, as well as the NBA logo from one of his game-worn jerseys.
The 51% stake cost Alt US$5.9 million, which was the most expensive trading card acquisition ever as at the July 2021 purchase. While it now sits third all time across all cards, it remains the most expensive basketball card.
Trading cards have outgrown their role as mere collectibles to become a legitimate alternative asset class with the potential for sound investment returns. Their tangibility, historical significance, rarity and emotional resonance make them a unique and appealing addition to investment portfolios.
While investing in trading cards requires careful consideration, research and expertise, it offers the opportunity to blend financial gains with cultural appreciation, making it a compelling and well-rounded investment opportunity within the realm of alternative assets.
