For portfolios in need of pinch-hitting

Once considered a quintessentially American pastime, investors worldwide are now combing card shops and auction houses for rare specimens.

Today, it’s a $1-billion-a-year industry supported by nearly one million serious collectors, a half-dozen card manufacturers and more than 100 weekly card shows. But the absence of a dedicated index and reliable historic data make it difficult to establish benchmarks for potential return on investment.

Wagner was a shortstop for the Pittsburgh Pirates and the first T206 Wagner card, as it’s known to collectors, was issued in 1909. By 1933, it was valued at $50. In 1991, it was sold for $451,000 to Canadian hockey legend Wayne Gretzky at a Sotheby’s auction. The card then, according to Forbes, fetched $500,000 in 1995, $1.27 million in 2000, $2.35 million in 2007 and $2.8 million in 2008. But in April, the Chicago Sun-Times reported that dealer William Mastro had admitted to doctoring the card.

Another Wagner specimen fetched $2.1 million at the April 5, 2013 auction organized by Goldin Auctions.

Major-league investing

Other vintage selections, printed between 1948 and 1969 and in good overall condition, have been shown to increase in value at a greater rate than many stock markets, says Tom Bartsch, editor of Sports Collectors Digest, a publication regarded by fans as the hobby’s bible.

“If you had cards from [between] the 1950s and the 1960s and wanted to cash them in now, you’d come away far richer than when you started,” he says. “If you prefer modern cards [printed in or after 1980], you can find packs with rookie cards that will likely grow in value for less than $10.”

Older, high-grade specimens can cost tens of thousands of dollars and bring greater returns if held.

But for those looking to make a buck, modern cards of relatively inexperienced players could be diamonds in the rough. “It usually means grabbing the rookie cards of highly regarded prospects and turning them over once professional success is achieved,” says Bartsch.

“Often the best time to look for a return is when they reach the major leagues and have early success [before] they regress or get injured.”

Card values are first and foremost based on condition. Everything matters, from scratches and bent corners to the centering of the photos.

Valuable examples have sharp corners and are free of discoloration, writing or defacement—unless it’s a player’s autograph. While some call the business recession-proof, it has had its share of dramatic price movements. “In the past, some items were considered rare until a find brought thousands more to the market,” says Bartsch. “Chances are with modern cards that could happen again.”

Collectors’ tastes and the athletes themselves can also bring down investment value. Just ask collectors of Barry Bonds, Roger Clemens and Sammy Sosa cards. In January, the star players were denied entry to the Hall of Fame, based on accusations that they used performance-enhancing drugs.

“The cards are attached to human beings,” says Bartsch. “For a current player, injuries, off-the-field issues and diminished skills all come into play.”

Such instances aside, high-grade material will always have buyers. And when the economy is humming, the bidding wars buzz. Although it depends on the investor’s net worth and risk appetite, Bartsch suggests capping the portion of such an investment at 25%.

“If you have a $500,000 to $1-million collection, you are in the very high-end of the baseball card collecting category,” he says. “This is a niche area of investing with a limited pool of other like-minded individuals.”

It’s also not a buy-and-forget investment. There’s just as much due diligence involved postpurchase, as well as the cost of care and storage. Appreciation relies on the collection being kept in mint or near-mint condition. Cards mustn’t be stored in places that are damp or hot, as they can warp or wrinkle and lose value.

Putting a rubber band around them (which discolours paper as it rots), placing them within children’s reach or storing them in shoeboxes that can be accidently thrown out are some of the most common mistakes, warns Card Collector Universe, a blog for enthusiasts.

It recommends using standard-count boxes (cost: between $5 and $50) and, for the more valuable items, plastic card holders known as toploaders, or penny sleeves (approx. $12 for a pack of 100).

Insurance also adds cost. “There are several collectibles-related insurance companies that specialize in items like baseball cards,” says Bartsch. “You can get a $200,000 policy for $800.”

In the U.S., there are two key players: Collectibles Insurance Services LLC (CIS) and Cornell and Finklemeier (CF). A policy for a collection worth $100,000 through CIS costs about $640 without deductible.

CF charges $900 per year, with $1,000 deductible for a similarly valued collection, according to The Cardboard Connection, a website dedicated to sports card collecting.

When cashing out, investors must use reputable sellers because “the average card shop dealer will pay a fraction of what cards are worth,” says Bartsch.

Alternatively, collectors can trade on such websites as ebay.com, beckett.com, sportsbuy.com, checkoutmycards.com and etopps.com.

Another website, thepit.com, calls itself a “sports stock exchange,” where investors can buy a piece of a sports star “using their most popular cards as shares.” The site has a “stock” ticker and many charts, including most active trades and week’s top gainers.

There are no established, long-term benchmarks that record and track card prices relative to the stock market. However, according to research conducted by Sports Collectors Digest, baseball cards annually returned 8.6% on investment from 1981 to 2012, and 1.2% from 1992 to 2012. (These results are based on a series of assumptions and approximations. Real-life experience may be different.)

As baseball’s most quotable character Yogi Berra once said: “In theory there is no difference between theory and practice. In practice there is.”