Iris ten Teije is co-founder of Koia. Koia opens up access to alternative assets via fractional ownership.
In April, a new record entered the Guinness World Records: A Pokémon card was sold to YouTube star Logan Paul for over $5 million. Was this just a publicity stunt from an influencer, or was there more to it?
The world’s wealthiest have invested in trophy assets such as watches, art, cars and fine wine for hundreds of years, and these assets are becoming increasingly well known to the general public as alternative investments. Nostalgic collectibles such as vintage video games, trading cards and toys with large communities of loyal fans are starting to get more mainstream interest as their values rise.
What’s behind this rapid rise in interest, and do these collectibles make good investments?
The Surging Collectibles Market
Both a cause and an effect of the increased interest in collectibles is that prices for items such as trading cards have been rising rapidly. A few notable stats:
• In 2016, the most expensive Pokémon card ever sold at auction was priced just above $50,000, a whopping 100 times less than the most recent record of over $5 million.
• Trading card company PWCC tracks the market via its trading card index. According to the index (at time of writing), since 2008, the ROI of trading cards has risen 1,346% for the top 100 cards, and 608% for the top 2500, with a steep acceleration in price rises over the past two to three years.
• Search interest for certain collectibles has also gone up. Looking at Google Trends for the past 18 years, for example, we see Pokémon cards showing an all-time high in February 2021.
The past two years saw an unprecedented rise in prices and the Covid-19 pandemic certainly played a part, with people having more time and money on their hands to invest in hobbies. Collectibles with a nostalgic touch fared especially well; after all, nostalgia is a powerful emotion that can help bring you back to happier times. I don’t believe, however, that it’s a temporary “hype” because now the fire has been lit.
Blurring The Lines Between Passion And Investment
The lines between passion and investing have certainly blurred in the last year, further explaining the rising collectibles market and why more and more people are considering it as a potential investment.
We started seeing this trend a few years back with traditional stock investing. Retail investors were no longer putting all their funds in basic index funds but wanted their investments to align with their personal interests or values. Think about the rise of thematic ETFs or crowdfunding, for example. Social investing apps and online communities around investing also started popping up, as I discuss in a recent article, making investing a fun and social experience where it is no longer just about numbers.
The explosion of the NFT market, which grew by 21,000% in 2021, further accelerated this trend. NFTs are often bought for speculative purposes but can also be in the forms of digital art, entertainment and emotionally driven purchases.
I believe we’ve now come to a point of no return: The days of putting money in an index fund and never looking back are gone, and we’ve entered an era where passion, fun and values are all part of the investment process.
Financialization Of Collectibles
What’s more, as a result of surging prices and interest, we’ve entered a stage where it is no longer just hobbyists dabbling in the space. Various platforms have emerged to financialize the hobby of collecting, including Koia, the platform I co-founded, attracting passionate collectors and more serious investors alike.
Trading platform Alt bagged $75 million of VC funding last year and started out by letting users upload their collections of trading cards on the platform to track the value of their collections. It has now added an auction feature and lists “guaranteed” liquidity and instant payouts as its benefits, akin to transactions in financial markets.
There are also various fractional platforms that have seen growing popularity, further driving the financialization of the industry. In the U.S., fractional investment platform Rally Rd places assets such as vintage games and comic books into companies, in which investors can buy shares, starting from just a few dollars.
Typically providing more data than your average auction or hobby store, these platforms are a good way for new users to learn and get into the space. As yet another sign of collectibles turning into financial assets, I’m seeing the first funds emerge that focus on buying up vintage collectibles. Aside from individual investors, even institutional investors are starting to put money in these funds.
What Are The Risks With Collectibles?
The biggest risk with collectibles is that, because they’re emotionally driven, value depends on people’s tastes and trends. You’re ultimately betting on the brand having longevity and that in 10 years’ time people will still be interested in owning the item you’re investing in today.
In some cases, speculators turned out to be wrong. For example, ’90s toys such as Furbies and Beanie Babies were wildly popular, and some Beanie Babies sold for thousands of dollars as speculative investments; in fact, the toys reportedly once made up 10% of eBay’s total sales volume.
At some point, however, people simply lost interest. The bubble burst and the value of the toys dropped significantly. Franchises such as the Pokémon Company have so far stood the test of time, but as with anything, it’s smart to not put your eggs in one basket and to do your own research.
With investors increasingly searching for yields and diversification, I believe the trend of alternative investing is here to stay and we’ll continue to see new ways of trading collectibles online in the future. We’ll likely see two sides of the market develop simultaneously: Companies will focus on making collectibles trading increasingly liquid, financialized and data-driven. On the other hand, platforms will emerge that will entertain, embed social elements and push boundaries of what’s possible when merging the physical and digital worlds. And, perhaps, the winner will crack them both.