Want to invest in Pokemon cards? Here're four things beginners should look out for before buying

It goes like this: while spring cleaning your room one day, you find your childhood collection of Pokemon cards, and instead of throwing them out, decide to try and sell them on Carousell for a quick buck.

You list the items for the best offer, and over the next few weeks get bombarded with messages from tens of interested buyers, ranging from requests for close up photos of each and every card, to offers of hundreds (maybe even thousands) of dollars. You think to yourself: For this small piece of cardboard?

Welcome to the Pokemon Trading Card Game community, where enthusiastic collectors buy, grade, and auction off cards for sometimes shocking amounts of money. Many see these cards as alternative investments on par with gold, branded watches and even stocks.

Why do I say that? Let’s imagine that as a kid in 1999 - the year Pokemon cards were first sold - you come across a set of 16 cool holographic Pokemon cards, but don’t have enough pocket money to afford the roughly US$144 they cost.

Seventeen years later, you’re working a full-time job and see that same set of cards again, this time for a whopping US$12,000. Nevertheless, you buy them to give your past self the fistbump he deserves.

In just four years, those cards (assuming they are in perfect condition - more on that below) would have shot up to about US$285,000 in value, meaning your returns would have beaten the S&P 500 Index by 33 times.

Don’t believe me? Here's a chart showing the percentage change in price for these cards, versus the S&P 500, between September 2016 and November 2020:

Group of 16 PSA 10 First Edition Base Set holographic cards (blue) vs the S&P 500 (orange). Card Prices are in USD and based on ebay's last sold listings. Source: Pokemonprice.com, Yahoo Finance

That’s right - it’s a 2200% vs 66% return over the same time period.

The scenario above is just an example, but as a serious collector, the returns on my current 6-figure Pokemon card portfolio are double that of the S&P 500 between 2017 and 2020 (120% vs 60%).

So, let’s say you’re now interested in getting yourself a share of these crazy returns.

However, just like regular investing, you have to do research. You can’t just go out and buy a bunch of random cards and hope to double your money in a few years. Like stocks, Pokemon cards appreciate at different rates, and you’ll need to develop the skill to select winners in order to see large returns.

As a beginner, many are unsure which of the thousands of cards out there to buy. In my experience, here are the four main things to consider:

1. Condition

2. Rarity

3. Popularity

4. Age

Disclaimer

Investing in Pokemon cards is NOT a get rich quick scheme. Just like investing in stocks, it requires hours of research and constant market participation. In addition, bear in mind that Pokemon cards are inherently worthless, with their value dependent entirely on market demand.

#1: Condition

The condition of the card is determined by its grade, which indicates if a card is in good shape or is damaged (has scratches, creases, whitening/chipped edges, was printed off centre, etc). Why is this important? That’s because cards with a high grade fetch considerably more than cards with a low grade, or ungraded cards.

For the grading process, collectors send their card to a third party authenticator, which assesses the card condition. Currently, the three largest authenticators in the market are: Professional Sports Authenticator (PSA), Beckett Grading Services (BGS) and Certified Grading Company (CGC).

The authenticator will grade the card from 1 to 10, with cards in perfect (or “gem mint”) condition receiving a 10. After grading, the card is assigned a serial number and encased in plastic to preserve its condition.

A Pikachu in gem mint condition, with a 10 grade. Source: Worthpoint

#2: Rarity

This is relatively straightforward: the rarer the card, the higher the price. One good way to check on the supply (and therefore rarity) of a card is to look up PSA’s population report for each card, which shows the number of that particular card sent in for grading. Take note that a card with a low population report does not necessarily mean that the card is rarer, it is also an indication of the popularity of the card (since collectors have to send them in to be graded in the first place).

For example, let’s look at First Edition cards. The term “First Edition” refers to the first print run of each set of cards, which are identified by a small logo on the card. This logo was discontinued for English cards in 2002, making First Edition cards quite rare.

A Mewtwo card with a First Edition logo. (Source: PSA)

Now, let’s take one of the most sought-after cards in the franchise: the Base Set Charizard card. (Base Set refers to the first-ever set of Pokemon cards printed in English in 1999.)

2,600 copies of this card have been graded by PSA, with only 121 scoring a 10. Source: PSA

Comparing the population of First Edition Base Set Charizard cards against their non-First Edition counterparts, you can see that the First Edition cards are almost seven times rarer.

Source: PSA

Even if both versions of the card are in perfect condition, the First Edition version will fetch a higher price. Case in point: American celebrity rapper Logic recently forked out US$220,000 for a PSA 10 First Edition Charizard card, while the highest a PSA 10 non first edition version has sold for is... US$16,100.

Another thing to note when assessing the rarity of a card is also its substitutability. Is there another card with the same artwork in a different language? Has the artwork been reused in subsequent releases? (For example, the artwork on the Base Set Charizard card has been reused 11 times to date.) All these will reduce the rarity of a card.

#3: Popularity

This is the most subjective factor of the four, and requires active monitoring of community sentiment to discern. Based on my observations, a card’s popularity generally comes down to these factors:

● The character’s popularity: Two of the most popular Pokemon are Pikachu and Charizard.

● Language: Cards in English are the most popular (due to the number of US collectors), followed by cards in Japanese.

● Unique artwork: Cards with special artwork are often more popular. A good example is what collectors call the “Pokemon Scream/Munch set”, from Pokemon’s 2018 collaboration with the Tokyo Art Museum for the opening of the Edvard Munch exhibition.

These cards, designed in the style of Munch’s famous artwork, The Scream, are extremely popular among collectors. Source: Nintendolife

#4: Age

The older a card, the more popular it is. Do not underestimate how much people are willing to pay to relive childhood nostalgia. Many kids in the late 90s and early 00s grew up with Pokemon, and this huge pool of people now have earning power, with many of them looking to collect the older card sets they wanted as children but could not afford.

The older the card is, the rarer it is as well. This is because the earliest batches of English language Pokemon cards were printed by Wizards of the Coast (WotC), a company best known for creating Magic: The Gathering, another popular trading card game.

WotC had the licence to print Pokemon cards from 1999 to 2003; from 2004, The Pokemon Company took to printing the cards themselves. WotC cards are not playable in the game’s current format, making it highly unlikely they will be reprinted. Meanwhile, newer card sets are generally printed to demand, making them more common. Hence, WotC era cards are way more coveted.

Last, older cards in good condition are supremely rare. Pokemon cards were released in Japan from 1996 onwards, and 1999 onwards in the US. The earliest sets are over 20 years old, and many of them have been extensively played, meaning finding one in perfect condition is only slightly more likely than striking 4D.

BONUS: #5

Yes, there is one final factor that will guarantee high card prices. Drumroll…... SEALED VINTAGE BOXES. These are undeniably the pinnacle for collectibles investors.

These are probably worth enough to buy you a house or two. Source: aronthemon/e4 forum

Sealed vintage boxes hit all four of the previous factors - they’re old, guarantee cards in good condition, and are popular among collectors. They’re also quite rare, as the supply of sealed boxes can only decrease, never increase. Why? Because as Pokemon continues to get more popular, more collectors are opening vintage sealed boxes to see which rare cards inside they can score. The highest recorded price for a First Edition Base Set booster box ever sold was US$375,000.

In recent years, there have been more cases of people selling fake vintage sealed booster boxes, so If you’re planning to get this, make sure it’s from a reputable source.

Some of the “winners” in my Pokemon card collection. Credit: @pokehillview

So there you have it - all you need to know to get started on your own journey of investing in Pokemon! If I can leave you with one last piece of advice, it’s this: as a beginner, don’t get distracted by hype or buy cards purely based on popularity without understanding the market. Follow your passion and collect what genuinely interests you! Everything else will follow suit.

Author Bio:

Ronald Chiam (@pokehillview) is one of those 90s kids who never grew out of their love for Pokemon. He has been collecting Pokemon cards since 1999, and made the switch to serious collecting in 2017. Although he actively invests in equities and money market funds, he thinks investing in cardboard for children is way more fun.