The market for alternative investments has been a really exciting field in recent years as investors are actively searching for high returns outside the “boring old” stock market. Similar to sneakers and domain names, Pokemon cards can be considered a form of “investment”. Many of these cards are being sold for thousands of dollars at various auctions every day. For example, the First Edition Holographic Charizard -that’s the name of the Pokemon card in case you’re not familiar- was sold in 2017 for over $50 thousand. So why would anyone pay this much for a card that doesn’t really do anything more than a card you could probably buy for a dollar? And are Pokemon cards considered a good investment?
Pokemon cards overview
There are 2 main grading services which authenticate and grade the Pokemon cards. These are Beckett Grading Services (BGS) and Professional Sports Authenticator (PSA). Generally, older, rarer cards in great condition have the highest value.
The most valuable Pokemon cards are in the Base Set: Limited Edition, 1st Printing (1st Edition, Shadowless). These cards have a little First Edition stamp on them (see image on the left). The cards in the Base Set: Limited Edition, 2nd Printing (Shadowless) are also very valuable. The Base Set: Unlimited Edition are considered the least valuable among the base sets. They are characterized by a shadow boarder along the right side of the Pokemon image (see image on the right).
The most Valuable Pokemon Card
The Pikachu Illustrator is considered to be worth a staggering $200 thousand. Fewer than 40 Pikachu Illustrator are rumored to exist in the world. It was first introduced in the late 1990s when, CoroCoro Comic, a Japanese manga magazine, held a series of illustration contests in which entrants submitted their own unique Pokémon designs.
What makes Pokemon cards so valuable?
Like almost the price of any good, the price of Pokemon cards is governed by the forces of Supply & Demand. What makes Pokemon cards of the Base Set -especially the First Edition- so valuable is that they’re not produced anymore. These cards were made back in the 90’s and were mainly used by kids. Even back then, the Charizard was extremely rare. Given that these cards were part of the deck of children, most of them were lost or are in an extremely bad condition. This makes finding a Charizard First Edition pretty much impossible. Now these kids are in their early 30’s. They have a much high purchase power and some of them are willing to pay tens of thousands of dollars for a card.
What matters when trading Pokemon cards?
- Is the card in good condition?
- Is the card 1st edition?
- Is the card rare?
- Is this card shadowless?
- How old is the card?
- What is the history of the card you want?
- Are you buying the card as a short or long term investment?
Are Pokemon cards a Good investment?
It could be but it’s probably not. Similar to investing in a stock, you need to know everything about Pokemon cards: How many cards are available? Who might want to buy them? And when is it time to sell? … If you do, you could potentially make tens of thousands of dollars trading Pokemon cards.
But trading Pokemon cards is considered more a speculation than an investment. According to Benjamin Graham -the father of value investing-, “an investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.” Based on the following definition it is, in my opinion, impossible to classify Pokemon cards as an investment. Speculation, on the other hand, is the purchase of an asset with the hope that it will become more valuable in the near future. And that’s usually the case when you trade Pokemon cards.
Another major problem with Pokemon cards is liquidity (similar to domain names). Pokemon cards are considered extremely illiquid. It can take months and even years until you are able to sell your Pokemon card.
I used to love Pokemon as a child but I probably won’t invest in Pokemon cards. As an investor, it is crucial to know your circle of competence. You must limit your investments in areas where you have a limited understanding and focus on areas where you have the greatest familiarity and expertise.
But if Pokemon cards are within your circle of competence and you have a high risk tolerance, I wish you the best of luck trading Pokemon cards!