I've been buying sealed boxes of Magic: the Gathering cards on eBay, with the plan to hold on them for months or years and then sell them at a profit when they're out of print. For those of you who never encountered this particular strain of nerdiness, Magic is a trading card game (the first, in fact). It has been around for 20 years now. Of note, there exists a robust secondary market for Magic cards.
I have a number of friends who play casually, as I do myself. In addition to casual play, Wizards of the Coast (the company that owns Magic), puts on various tournaments and events. This is where much of the demand for Magic cards comes from. To play in a tournament, your cards can't be faked or proxied. There is also demand from collectors. In addition to the cards themselves, there is some additional value in sealed packs for two reasons: 1) there is a format of play called "drafting" where a group of players make their decks from a limited pool of cards from opening sealed packs, and 2) some sets have very valuable cards in them, and the market adds a premium to packs from those sets.
I started thinking about this idea when I found a few sealed packs I kept around from when I started playing again around 2010. The most recent set at the time was called Zendikar. On a whim I looked up the price of Zendikar packs and noticed that they had greatly appreciated in value. Right now, Zendikar packs are selling for $9-$12 a pack. Magic booster packs usually retail for $4, and buying boxes of them can get you a price of closer to $3/pack. That is a pretty impressive increase in value.
I did some research on recent Magic expansions, and looked at the prices that sealed boxes of booster packs are selling for on eBay. Using conservative assumptions about initial prices, factoring in eBay sellers fees, and using only listings that have sold, I found that the compound annual growth rate (CAGR) averaged between 7% and 15%. This isn't a gold mine by any stretch, but by my estimation there's a reasonable chance to beat the stock market's historical average, and invest in something that's uncorrelated with any other asset class.
Here's a listing of what I bought and when:
| Name | Purchase price | Shipping | Total cost | Purchase date |
| M12 | $69.99 | $0.00 | $69.99 | 8/5/2013 |
| M13 | $82.99 | $0.00 | $82.99 | 8/9/2013 |
| Return to Ravnica | $89.99 | $0.00 | $89.99 | 8/11/2013 |
| Gatecrash | $89.99 | $0.00 | $89.99 | 8/11/2013 |
| Dragon's Maze | $89.99 | $0.00 | $89.99 | 8/11/2013 |
| FTV:20 | $189.99 | $0.00 | $189.99 | 8/21/2013 |
| FTV:20 | $174.99 | $0.00 | $174.99 | 8/22/2013 |
| FTV:Realms | $69.99 | $5.00 | $74.99 | 8/23/2013 |
| FTV:20 | $166.99 | $0.00 | $166.99 | 8/23/2013 |
| M13 x3 | $172.58 | $15.25 | $187.83 | 8/24/2013 |
| FTV:20 | $116.03 | $6.85 | $122.88 | 9/18/2013 |
| $1313.52 | $1340.62 |
Here are the current prices for these products:
| 11/10/2013 | ||
| M12 | 1 | $72.00 |
| M13 | 4 | $78.00 |
| Return to Ravnica | 1 | $88.00 |
| Gatecrash | 1 | $86.00 |
| Dragon's Maze | 1 | $80.00 |
| FTV:Realms | 1 | $65.00 |
| FTV:20 | 4 | $120.00 |
| Gross | $1,183.00 | |
| Fee | $118.30 | |
| Shipping | $65.00 | |
| Total | $999.70 |
As you can see, I'm not doing too well. That's alright though, because I was planning on holding on to most of these for a few years. You can see where I went wrong with buying a few "From the Vault: Twenty"s too soon after they came out. "From the Vault"s are special collectors edition products with a known set of tournament-legal reprints of various cards. Demand was high for FTV:20 when it came out and since then the price has dropped. The rest of the boxes have basically stayed static, which is what I was expecting. You can also see what kind of a bite fees are going to take.
Anyway, I want to be open and honest about how my alternative investments are going. I am planning on posting updates every few months.
I think it's important to realize that there are a lot of opportunities out there that you could be interested in, if only you open your eyes to them. When you're on secure financial footing you can take advantages of opportunities that come your way. In this case I decided it would be fun and interesting to try a different kind of speculation, one that not many people do. Who knows, maybe I'll lose a bunch of money, or maybe I'll hit the jackpot.
Glad to see you only put $1000 into this. The Star Wars:CCG cards gathering dust under my bed in my parents house are worth 25% what I paid for them in middle school in 1997. That's like an 82% loss after inflation.
ReplyDeleteStarwars TCG was great. I have a bunch of those cards too. If only the market for them has grown like the Magic market has, we'd have made a good return on those too.
DeleteI actually like it. You got an investment that has nothing to do with anything, and has been stable for years now. Risky indeed, but you know that.
ReplyDeleteThanks for the encouragement. We'll see how it works out.
DeleteI was pretty disappointed to see this but am hopeful you've learned more and perhaps will estimate the risk better next time. I remember the hype with kids in school about these 20 years ago and how they were mostly gone within 6 months. I think this was an emotional investment (you thought you were very familiar with the economy since you've used the product and seen some good sales), which clouded your estimation of the risk and effort needed to produce a profit. Your analysis at the end of getting eaten by the fees is especially enlightening.
ReplyDeleteI think most of the mustachians would like the boring articles, I bought 25 of XX PLC and will get a dividend payment of $ next month. Since you're heavy on GLW, perhaps you should find two new companies to pay dividends in different months? I think this may have more excitement when you get the dividend notice with no shipping requirements to sap your happiness.
Cheers!
I definitely learned a lesson about speculative investing when the price of FTV:20 kept dropping from $190 down to $120. I admit I was too emotional some of the time I was making purchases. This is a lesson I will learn cheaply. But that said, I still think my investment thesis is sound.
DeleteThanks for the feedback. I'm overdue for a "boring" article -- my investments have been doing pretty well. Still, I think it's important to look for new opportunities and share them when I think I find something.
I would like a December net worth update too. Since I'm totally not going to update my own blog I'll just spill it here: I hit 10.000€ today.
DeleteWasn't it MMM who wrote about this case of a woman investing in these trendy teddy bears in the nineties or whatever they were thinking they would pay for her daughter's tuition? You can find those in any thriftshop for a couple of bucks now. I would never bet my money on trends like these.
ReplyDeleteI know all about Beanie Babies. My dad actually got into the fad back when it was big in the late 90s. They're basically worthless now. The difference is that there is utility in Magic cards, whereas plush toys have very little utility.
DeleteDon't get me wrong. There is risk here, specifically in the chance that the popularity of playing Magic in person, in tournaments and otherwise, will decline over the coming years. I'm betting against that. I could be wrong. We shall see how it turns out.
As a former avid player of the game (I started when it first came out) I had a very large collection then I sold my collection when I realized I had not played the game for several years. The opened collection sold for approx 3 times my total investment. I however managed to sell sealed packs of Alpha and Beta for around 85$. 20+ years ago I pickjed these packs up for 3.25 a peice, you got no discount then for buying in bulk. The trick with these is to hold on to then for years and is a long term investment and collectors will pay large amounts to complete sets and get sealed boxes. Its risky but will probally pan out in 5 to 10 years. This is based on my own previous experiments in this market. Beanie babies were a fad, MTG however has been around for 2+ decades that makes it an institution in the gaming industry. Only DnD has a longer track record. And my beat up old pamphlets from the 70s are worth alot more than I got then for. Players are an odd bunch and will shell out alot of money for things that make no sense to you, you have to be a gamer to get it. I buy Games Workshop Warhammer 40k mod and paint them on spec and have yet to take a loss. The most important thing about investment is to know your market.
ReplyDeleteOh wow, you had sealed alpha and beta boosters? That's fantastic. Yeah, you've basically laid out my investing thesis. I'm betting that sealed product will appreciate in value over a period of years, after sets go out of print. Thanks for stopping by.
DeleteHi, I've been doing this for years. I started saving booster boxes with Stronghold. It takes many years to get a really good return. It's still a lot better than most investments.
ReplyDeleteInteresting blog. I think that you will eventually make money on this. I would recommend no FTV and no base sets (M12, M13, etc). Go for the sets that have great Legacy cards (WWK, Zen, INS, RTR, AVR). Identify those sets early and you can get boxes for $90 or less. WWK is now $500 a box!
ReplyDelete