Baseball Cards Can Teach Us Some Things About Investing, by Scott Stolz, CFP, RICP (week 31)

 When I was 5 years old, I discovered baseball cards.  The older kids in the neighborhood collected them and since I wanted to be like them, I had to collect them too.  Not coincidentally, that’s when I started playing baseball as well.  Every Sunday after church my dad would take my brother and I to Hood’s Pharmacy in Urbana, IL.  He would give us a each a quarter so we could buy five 5-cent packs of cards – complete with gum.  Of course I was too young to know any of the players, so I aways had to ask my dad if I got any good players amongst by 25 cards.  I remember asking him if some guy named Mickey Mantle was any good.  He confirmed that he was.  I was glad because I thought he looked really cool on his 1965 card.  I’ve collected cards ever since.  And I was lucky, because my mom never threw my cards out when I got older.  Now, if I had only left some packs unopened.

The picture below is a 5-cent pack from 1960 that recently went up for auction.  Amazingly, it remains unopened to this day.  It sold for $6,063.  Think about that for a second.  Had you invested just 5 cents to buy a single pack of baseball cards back in 1960 and then put that pack in a safe and never touched it, you could now sell that pack for 121,260x for what you paid for it.  Had someone splurged and bought 165 packs for $8.25 those packs would now be worth a cool $1 million.

There are three important investment lessons in this example.  First of all, the power of compounding is an amazing thing.  We would all be thrilled with a 5-cent investment that grew to $6,063.  But you would probably be surprised to learn that works out to “only” 19.5% per year.  I know I was.  I expected this to calculate out to 40-50% per year.  In fact, I ran the calculation three times to make sure it was right.  And I double checked it with ChatGPT as well.  Now mind you, 19.5% per year for 66 years is extraordinary – more than twice the stock market’s long-term average return.  The investment lesson here is to start socking money away into either a 401K or IRA as soon as you can.  Even a small investment left alone to compound for 30 or 40 years will grow to a surprisingly large amount of money.

Lesson #2 is that if you invest long term in individual stocks, it’s likely to be just a handful that provide the bulk of your returns.  Therefore, it’s important to be like Warren Buffet and hold those high performers for many, many years.  I remember buying stock in Amazon early on.  I was quite proud of myself when I cashed out my investment after almost doubling my money in a few short years.  I try not to think about the value that stock holding would be today had I not sold.  My baseball card collection works the same way.  I probably have over one million cards, but 500 of those cards probably make up 90% of the total value.  A quality investment can grow a surprising amount if you simply give it time.

Lesson #3 is to invest in things that are in demand and in limited supply.  One of the investment theses behind bitcoin is that only so many coins can be minted.  Therefore, if demand continues, the limited supply will continually put upward pressure on the price.  Many people buy real estate in part because as Mark Twain is credited as saying, “they’re not making it anymore.”  Certainly, they aren’t going to make any more unopened packs of 1960 baseball cards.  And in this case, the supply will actually fall over time.  There will be some people that chose to open these packs in hopes of finding a gem mint Mickey Mantle or Willie Mays card – the baseball card version of winning the lottery.

When I was a kid, Topps Card Company released their baseball cards throughout the season in seven separate series – typically about 100 cards per series.  The first series would come out as players were reporting to spring training.  The final series would be released late in the season – sometimes after the World Series.  We would anxiously wait for the final series so that we could complete our collection.  But that didn’t happen in 1967 – at least not in my hometown.  With football season approaching, Topps elected to move on to football cards and therefore printed a limited number of cards for the 7^th series of 1967.  Due to the limited supply (lesson #3), 7^th series cards from 1967 sell for a significant premium over the other cards from that year.  It just so happens that Tom Seaver’s first card appeared in that series.  Therefore, this card in near mint condition can sell for $20,000.  One of these days an unopened pack from the 7^th series from the 1967 set will come up for auction.  After being denied the opportunity to buy this pack 59 years ago, I would love to buy it.  But I’m quite sure I’m going to be paying much more than 5 cents should I find on