Taking money out of retirement funds to purchase cards
 

On another forum, I read a post where two member spoke about buying cards and withdrawing funds to purchase vintage cards that they wanted. One had being doing it for a while and said that “buying and holding vintage cards made more sense that investing in stocks”.

In a recent conversation with a dealer, he said that this was commonplace, especially in the last few years. Some buyers have had to delay card purchases due to having wait for the payout from funds.

Is this commonplace? I, personally, cannot fathom withdrawing funds from my retirement for card purchases, but maybe I am in the minority.

wuold never do that ,,what i dont have today i dont need tommorow

Investing
 

I'm from the old school. Don't touch your home's equity or retirement accounts.

I remember 2008...401ks, home equity, college funds of so many people I knew...gone by being risky.

Not saying this is anything like the RE market, but you worked your entire life for that money.

An old investor told me years ago.."It's like a football game; when you make a field goal and there's a penalty on the play....never take points off the board and get greedy.."

It's not necessarily crazy. How has the 311 done compared to the S and P 500? Maybe it makes sense to diversify for some people.

Wow...

I mean...wow.

I suppose there are worse ways to invest your retirement savings. Certainly crypto is high on that list, along with anything where you're just spending it and it's gone forever.

There's no question that they'll probably get more enjoyment for now out of buying cards, but those chickens are going to come home to roost eventually, at which point hopefully they don't come begging for the rest of us to fund their retirement if they end up short.

But priorities, right? Cards are good fun, and if we're lucky, we'll sell them before we die for more than we spent on them (or before we die and the wife sells them for what she thinks we spent on them). But to risk your financial security on them seems like you're playing with fire.

It worked well for me over the last few years. However, I'm nowslowly adding back into stocks over the last year or so. Not something I'd reccomend if money is needed within the next 15 years

Draining retirement accounts to do it doesn’t sound like diversification but going all in on the current fad.

Although, I have been reliably informed by people who put too much of their money into cards that the only direction for baseball cards is up, and Mickey Mantle is the safest investment that can be made. Empty your retirement accounts, sell your house, and put all in on mass produced cardboard pictures. Be a visionary and print that money #investemoji

I act as if my cards ARE part of my retirement. For me, it's all about diversifying. I have quite a bit into cards but it's not a double digit percentage, or barely one, of my net worth. Everyone has a unique financial situation but having some of your money into cards isn't a bad thing.

.

I wouldn't advocate draining retirement accounts by any means, but it isn't an all or nothing proposition.

what really makes sense is the 30% taxes with penalty. Very Dopey Strategy made by Dopey Mcdope dopes

Agree. Any collection worth more than a small amount is diversification of sorts.

I have never specifically taken retirement money to buy hobby stuff and never will.

Drew, I have heard some of the same things from dealers who set up at the bigger shows with the higher-end vintage names I collect. From what I’ve seen and heard this has been commonplace since around the Start of all these Vaults, especially since March 2020. Idk to each their own I guess.

1 thing to "invest " in the cards that you do, in lieu of funding the 401K or roth.
However, once in your retirement accounts, it's shouldn't be coming out until retirement. Also another thing to have a good portion in cash, within the account. Paying 30% taxes to withdrawal is for idiots. Dollar cost AVG never hurt anyone:D

Right, and any decision to spend more than a small amount on cards, rather than putting it into stocks or other assets, is whether one likes it or not, an investment decision or one with investment implications.

If you’re to the point where you’re taking money out of retirement accounts, and incurring the heavy taxes and fees for doing that early and improperly, I have a hard time seeing how this person isn’t going all in. Once you’ve gone this far, there isn’t much further to go.

I have no problem if people want to invest some money in coins, stamps, crypto, beanie babies or cardboard. It’s riskier, but there’s also a plausible chance they will outperform my index funds. If you’re taking money out of retirement accounts to do it, this person really should hit pause and reflect on what they are doing.

Very Dopey Chuck. I hope Bob C can opine on this further. To me, this whole subject of investing in sports cards has taken a sharp turn for many to day trading, no buy and hold investing or buy and homework investing. They want To be vaulted where they can easily flip their cards while buying other ones in the blink of an eye. I don’t mind people investing in cards one bit, it’s the PWCC Brokerage House Trading that has me a little concerned about the future.

And once the cards are in the vault, then you can borrow against them to buy more cards!

So not only have you placed 100% of your assets into cards, you've leveraged up to 160% or more...

Isn't it wild!! Feels like a very slippery slope to me. Idk thank God we have smart guys with money who love the cards and are keeping this hobby strong many of whom are on this board :-)

I guess maybe they follow Michael Saylor, except instead of Bitcoin, they go with cards:

‘How do I buy more Bitcoin?’ Take all your money. Buy Bitcoin. Then take all your time, figure out how to borrow money to buy more Bitcoin, then take all your time and figure out what you can sell to buy Bitcoin.” - Michael Saylor

It's not something I would do.

I also wouldn't take on debt to buy collectibles, although I've been told that I won't be a serious collector until I do. That was regarding a stamp that was "needed" to maybe make an exhibit worthy of a top prize. Of course there's only one, and the last sale was 60K, more debt than I'd ever consider for a collectible.

I don't think enough info is provided. What type of retirement account are they withdrawing funds from? What are the ages? Withdrawing from a 401k is much different than withdrawing from a Roth IRA same as withdrawing before age 59 1/2 is a lot different than withdrawing after age 59 1/2. That information will have drastically different issues with taxes and penalties on the withdrawal. As I understand the rules, personally I might consider it from a Roth IRA, but wouldn't even think about it from a 401k.

You could take out what you put into your Roth Accounts Before 59 and a half without any penalty, just not your gains.

Exactly my point. Withdrawing from a 401k you'll get rocked on the penalties and taxes, but a Roth you're not going to have the same expenses taking out your contributions.

Yes sir. A tradition Ira or 401k withdrawal prior would be Tax Hit City.

Idk people are Addicted to Cards and the Possibility of Making Major Gains now so I can see where they’re gonna get tempted and do it. Idk 🤷*♂️ nothing wrong with it. It’s their money, I guess smoke it if you want to.

Good thoughts, DJ.
First of all, I haven't gotten into debt over cards. I might extend a payment for a short period, but that's it. And that is because I didn't want to take money from retirement accounts. And I am still not going to do it BUT .....

...As devil's advocate. What is the difference from taking it from one account or the other AS LONG as you account for the tax implications. Let's say I want to buy a 35k card out of my 401k. Whenever I take it out, now or later, it's going to be taxed. IF I account for that, and take 50k? out, to pay the taxes, what's the difference?

(and I have both IRA and ROTHs). I just turned 61 (dang I am old).

I believe you can withdraw without penalty from a traditional 401k without penalty if you replace it within 90 days.

So many kids over on blowout using credit cards to buy modern boxes from panini, grade the cards on their credit card, just to flip and pay the card off before interest accrues. A dangerous game of hot potato.

But cards only go up

And stocks can only go up too.

Medical bills for my wife took all of our savings.

First, congrats on reaching 61, Leon.

Second, while the tax penalties are important, don't miss the forest for the trees here. The major point that this discussion is missing is that once you withdraw funds from a retirement account, you can never put them back in. There are very low annual limits that limit the amount that you can contribute to your tax-advantaged retirement accounts. If you start pulling cash out, then your ability to put it back into those accounts is very limited. And for those of us with a short runway between now and retirement, your ability to replace those funds is even more limited.

The ability to bank tax-deferred (or tax-free in the case of a Roth) growth in a retirement account for multiple decades is one of the easiest and low-risk financial layups in our country.

For most Americans, we already are woefully short (financially speaking) when it comes to preparing for retirement. For Americans in their 50s, the median account balance is ~$60k. If you've got $60k in your retirement account and you're in your 50s, I can guarantee you that pulling those funds to buy cards is going to leave you waaaaaaaaay short for retirement.

Let's say you pull $50k out of your Roth today, instead of leaving it in the account for the next 30 years before you need it. If it grows on average at 7% per year (which is not an unreasonable assumption), at the end of 30 years, you've got $380k, all of which is tax free. If it grows at 8%, then you're talking $500k.

Even for someone like Leon who just turned 61, the odds are good that you will live to be 80 or 90, so you may very well be keeping some portion of your retirement account invested for the next 20+ years.

Don't just focus on the tax penalties, because that's a total and complete red herring in this discussion. Remember that there's a lot more involved than just what happens today, because making this decision today could dramatically affect your financial health once you to reach retirement.

Assuming you're right about replacing the money in 90 days, that's still a dangerous game. Come day 91 Uncle Sam isn't going to care what you were doing with that money.

However, this does touch on another point to consider. As I understand it, once you take money out of the retirement fund, you're going to struggle to put it back in down the road. In the Roth example, if you withdraw the contributions, you can't put those back in later. You can make new contributions, but you're still limited to the yearly maximum and can't go over it. So in 1, 5, 10 years, when cards are no longer a "good" investment, you're stuck with those funds being outside the retirement umbrella.

I had a chance 3 years ago, late 2019 to buy a SGC 6.5 311 Mickey Mantle for $82,000 Cash. It was beautiful but had a little toning/browning of the borders. I could have done it with my ROTH Def Comp but didn’t do. It’s all good I missed it, 100% looking back it would have been very smart but hey you win some you lose some. Tomorrow is another day to learn and be productive :-)

Exactly the same sentiment. It's scary. Many factors also resemble the housing boom that led to the financial crisis.

Sometimes it's better if you don't win big the first time you pull the slot machine, because then you get cocky and keep pulling it until you lose everything.

Agree Fully !!!

In many cases you can get a loan against your 401K and pay yourself back with the interest going to you. Not that I'm advocating that to buy sports cards.

Yes, you can take a loan, but...

You have to pay it back within 5 years in substantially equal payments at least quarterly.

And there are pretty low limits to the amount that you can borrow. Basically the max you're going to get is $50k, and the limit could be lower for a lot of people. It's not nothing, but you're not going to buy many 52T Mantles with it.

Needless to say, there's not much of a long-term hold strategy here.

I guess if you're extra enterprising, you can put the card into the vault and borrow from the vault and use that to repay your retirement account loan. Or even better, use the vault loan to buy more cards!

Who knows, but all asset classes have their own set of risks especially short to medium term. IMO this bright line distinction between the stock market and cards is not necessarily right.

I don't think there's anything wrong with having a portion of your assets in nontraditional investments like collectibles. And I think we're all on board with that idea. Hell, if I'm honest, especially based on the runup in values the last couple of years, about 25% of my assets are tied up in cards. At the same time, I max out my contributions every year to my retirement accounts.

But taking cash out of your retirement accounts to buy collectibles is folly.

I was using Leons 35K example, it would get you a 1914 CJ Cobb if you want one and you're not paying interest to anybody but yourself. If you think the Cobb is worth more in 5 years than it is now and will appreciate at a faster clip than you 401K investments then it might pencil out. If you have $400K in your 401K and you want 9% of your assets in sports cards and you wanna take a gamble then it might make sense. And that's a big might.

Keep in mind that the portion of your retirement account that is loaned out to you is also not growing when it's loaned out to you, other than the interest that you're paying yourself, which is usually pretty low. If the market goes nuts during that window, then you miss out.

I think you will make way more on certain vintage cards then the s&p 500

I could not and would not ever think of doing this. I have been saving and planning way too long for the day I can hang up the network geek shirt and move onto the next phase. And not to mention, my wife would kill me.

More motivation in that last sentence than anything above it.

I have a little over a year left. And it just cannot get here fast enough for me.

Cheers,

Butch.

Same here. And I think she would be right! :)

The answer is different for different people but for some they will be in a lower tax bracket when they retire. Thus, the t (tax rate) is not the same in both cases. Secondly, by withdrawing early you loose the compounding in the money. That said, the compounding on the card might exceed that on the retirement account investment (or it might not). The other thing to consider is that the transaction fees for buying and selling cards, if done via the auction route, are much higher than fees in the equity markets.

I have made it a practice to not take funds that are earmarked for any purpose to use them for another. I have never borrowed formally or informally to fund a card purchase. As I have done with everything in my life, if I want it and have the money for it, I go get it. Plain and simple.

As Leon stated, my cards too are part of my retirement. Until such time as cards become an asset class that are regulated, I would question anyone's judgment who withdraws from a retirement account to fund a card purchase unless it is as a loan and they are as sure as they can be that it can be paid back in the time stipulated.

I have done as well with cards as I have with real estate, over the years but I would never suggest to someone that cards are a better investment vehicle for appreciation than stocks, real estate, etc.

[Updated a bit because I realized some of my math was off...]

Good point about the added friction of selling costs.

I think when you factor in selling costs and taxes, you’re going to end up with a lot less than you expected.

Let’s say I buy a 311 mantle for $500k, and in 10 years it goes up to a cool $1M (with the juice). How much do I get to keep after auction fees? If it sells for $833k before the juice ($1M including the juice), the auction house keeps the bidder's premium, and I get charged 5% listing fee, then that leaves $791k.

Now I have a taxable gain of $291. I’m going to pay 31% to the feds for income tax (including my Obamacare investment taxes), plus let’s say I’m in a middling state with about a 4% tax rate. All-in, I’m at 35% for taxes. So I pay about $102k to the government, leaving me with $689.

I net about $189k, which isn’t bad, but probably a lot less than what you were expecting by my card going up by $500k.

If you think it’s going to only double in value in 10 years your better off with the s&p 500

Even if it goes up by $500k in one year, I'm still getting a lot less than the $500k that it went up by.

And if I bought the SGC 5 #311 Mantle at $306k, then it might take longer than 10 years for me to double my money.

[Spoiler alert: I didn't buy that Mantle.]

Do it if it's something that you really want and most likely won't have another shot at it. You only live once.

I am really sorry to hear that. The family financial pillage that occurs in this health care system model is appalling. I hope you both are well and have long, prosperous lives to rebuild.

Anyone who did this between 2000 and 2019 outperformed the market massively if they bought blue chip cards. I wouldn't do it now, but it has worked in the past.

I know the OP is talking about people pulling money out of retirement accounts, but in a way we are all doing this with our collections. Every dollar you spend on baseball cards is a dollar you could have plowed into a Vanguard fund. I'm sure there are people who just invest every extra dollar, and to them the way we spend on cards probably looks crazy.

As card prices surged, my wife asked me why I hadn't bought some of the highest-flying cards when they were relatively affordable (Ruth RC, etc.). I said because I was being responsible and putting every spare dime into IRAs and other savings vehicles: if I'd come home and said "hey, honey, I just took the IRA money and bought a great Babe Ruth card", she'd have thrown me and the Ruth card out of the house.

As for the OP, I think many of us are starting to look at our collections as retirement vehicles. I know that I plan to make picking and dealing into my main occupation when I can retire from my law practice. It can generate some reasonable income and it is just plain fun.

Taxes are intensely personal; there is no one-size-fits-all formula. For example, right now cards held for more than a year are taxed as capital gains at 28%. However, if you create a business and sell that way, your profits are taxed as ordinary income. Then there is the question of entity use, which can result in a pass-through of some income tax-free under the Section 199A deduction. You have to calculate hard and soft costs of using an entity (state franchise taxes, formation costs, costs to file tax returns) against the costs of either going with capital gains or doing a Schedule C and eating some self-employment taxes.

There's also the question of what else you could do with your money and what you have done with your money. Cards are a storehouse of (untaxed) value, same as any other hard asset that doesn't produce income, but the cost to get out is that tax hit on your profits. On the other end of the spectrum, the first $500,000 of gains from the sale of a married couple's principal residence is tax-free. So, you could say that it makes sense to buy a home first and accrue up to $500,000 in potential gains at a tax-free rate over time rather than buy a card first and face a tax on the gains when you sell. $500,000 tax-free is the same as roughly $700,000 with taxes.

In other words, there is no simple advice other than if you are really interested, have a professional figure it out for you.

ETA: one further thought on pulling funds from retirement accounts. We will all face the dreaded "RMD" (required minimum distribution) if we live long enough (I think it is/was 70.5 and I thought I read it was going to be 72), and if we inherit an IRA the distributions can start even earlier than that (Inherited IRAs have to be liquidated within ten years). Money is going to come out of these accounts and be taxed, so spending it on cards may be a good play at that point, as a reinvestment. Until an RMD, it is really, really dicey to pull money out; the ROI better be stellar to justify the tax rate and the penalty for early withdrawal. Plus, the accounts offer a level of asset protection that cards...don't.

And while we are at it, one final thought on velocity. One mistake that the shiny crapsters make is not getting out with a profit when the getting is good. I was at a card show recently and one of the dealers was screaming into his cell phone at someone to "dump my Tatis!" Apparently, he'd been offered into six figures for a Tatis card, declined, and had, shall we say, regrets. If you want to have the card until you die, that's one thing, but if you don't, get out when the profit is good and move into the next deal.

Cards might go down, cards might go up.

Stocks might go down, stocks might go up.

Generally, over the long haul, if the major stock market indexes doesn’t go up over the long haul (a retirement account is a long haul investment), the dollar will be collapsing and collectibles will be worth little to nothing. One may make more on 52 Mantle’s or the right vintage, but the indexes are a lot more secure. If they collapse, everything collapses. I’m all for taking some smart gambles, but retirement accounts should not be withdrawn (with those heavy penalty hits) to gamble on baseball cards. Safe and solid is a wiser approach for retirement, but that’s just my opinion. If one wants to go risky, risking it in a way that doesn’t incur huge withdrawal fees seems the wiser risk. Take some income and put it into cards if one wants, or yolo it on crypto, some risks can pay off a lot better than the stock market. But don’t take out of retirement accounts to do it.

I would only plow into an investment asset class during some kind of treacherous time in the market when it becomes ridiculously under valued relative to it's past performance. High End Vintage to me right now is not the time.

If only we could know when things were ridiculously undervalued, we'd all be fabulously wealthy.

Warren Buffett did it quite well over the years!!

Like this?

In mid-April 2020 the price of a barrel of West Texas crude went below $0 as sellers had to pay get rid of it.

2.5 years later a barrel of WTI currently sits at $87.78

Game used flannels. They are at least 50 years old, so truly vintage. They are scarce, large, colorful, display well, and are tied directly to the player, the stadium, the clubhouse, the batters box and basepaths. With road jerseys, they also travelled with the teams on trains or planes. A pre- 1958 road jersey from any NL team likely saw Ebbets Field, the Polo Grounds, Sportsmans' Park, and so on.

There might even be actual trace DNA in the fibers of the shirt.

If you're looking for the next thing where suddenly, everybody is going to say, "Doh! Of course! This is the coolest, most under-valued thing ever," it's flannel gamers.

No cotton?

https://www.youtube.com/watch?v=sTQvIq0ritI

I would be shocked if it was investing in modern sports cards. That's a risky game especially Bowman 1st. I wouldn't encourage that.

My dad did not invest in stocks, he invested in index fund portfolios. it created diversity and shrank risk. it also prevented high yields from stocks like Apple and Amazon. If an investor is strictly talking selling stock to invest in major foundational sports cards, I'd probably not be too concerned because IMO the risk is the same, and he's trying to create diversity. But if an investor wanted to move from an index fund to cards, maybe I would be hesitant because diversity is built into the funds.

I would think the investor could do no more worse with major foundational cards than with bonds. I might even encourage cards over bonds if they are just trying to hedge against inflation rather than seeing it as a volatile market.

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Not the slam dunk you think it is. The reason WTI went negative was because such futures contracts had to settle physically at Cushing and, at the time, Cushing was almost completely full. So, sure, you could have had someone pay you to take that contract off their hands, but you would have also had to take delivery of actual crude oil and find somewhere to store it for 2 1/2 years so that you could sell it today for $87.78

As to the opening question, I would never borrow against my retirement even with the lure of higher returns. I have made financial choices in my life that ended up costing me in the long run (I am looking at you, QCOM), but when I sit with my financial planner and he tells me that his Monte Carlo simulation says I have a 98% probability of maintaining my current lifestyle in retirement, I have no regrets. FOMO holds no truck with me. My collection is my hobby only and represents around 2% of my net worth.

Nothing as complicated as futures for me Jeff, just a recalibration. When you read a headline like "oil below zero" it's a shout from the mountaintop to sell the runners that got crazy because at the time people thought they'd spend the rest of their lives inside pedaling Pelatons, shopping with Shopify, and clicking through on their Roku TV's. Sell Zoom buy ConocoPhillips was the clear play, of course one would have to separate emotion from the trade, I just wish I could have separated more and gone all in.

Cards are not an investment. If you are buying cards to make money on them you are speculating, not investing. There is no intrinsic value to cards, all they are worth is what the old farts on this site are willing to pay for them, as long as we are around.

If you made a lot of money on cards, good for you. Maybe you were smart, maybe you were lucky, or most likely you were just obsessed.

Bur think about it. Right now you have a piece of cardboard with a picture on it that cost two cents to make 50 or 100 years ago, and you are hoping somebody will be willing to buy it from you for $1000 or $100,000 ten or twenty years from now. Because why?



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I borrowed a few times from my 401K to fund card purchases. I always paid it back. And I have a couple cards that matter more to me than the earnings that I missed out on in the market while paying off the loans. I don't know if it made financial sense to borrow, but the cards mean more to me, so it makes sense in that regard anyway.

The intrinsic value argument is not a good argument because it is exactly what can be said about stocks, art, gold, diamonds, and nearly every other thing (tangible and intangible) that we use to store value. There is no intrinsic value to any of it other than what some old farts willing to pay for it agree it is worth. As for speculation, so-called 'investments' all are speculation. if that was not the case, why would SEC Rule 156 (17 CFR 230.156) prohibit mutual funds from telling investors to base their expectations of future results on past performance? Simple: because it is all speculative. Any differentiation between one form of construct and another is merely a perception of value and risk relative to one another.

There is little in this world with 'intrinsic' value. Just land, food, fuel, weapons and drugs. But securities, art, cards, even a dollar? Just a construct, worth what people collectively agree it is worth. Or to quote Gordon Gekko: "The illusion has become real, and the more real it becomes, the more desperately they want it. Capitalism at it's finest."

I have borrowed to buy a card too. I have borrowed from my retirement, not for a card, but I wouldn't hesitate in the right situation.

I am always amazed at these threads and the negativity towards cards as investments. I have been doing it for 38 years and making easy money. I have constantly heard these negative comments from those not in the hobby, they just don't know. From people that should is just shocking. Sports cards have outperformed the market for 38 years and by a lot. I am not ready to get out yet.

If you are happy with mediocre returns in the markets, then make that choice. I have investments I'm the market too. Why so negative towards those doing better with cards? For those in the market, you have made zero the last 3 years. Why would you be surprised at someone moving investments from something not currently making them money to something that is?

No risk no reward
 

It’s not as crazy and some seem to be acting. In fact do what you are comfortable doing. Many people have made a lot of money on cards and other collectibles. If you go with blue chip items it’s not near as risky as some of the scared people pretend it is.

money
 

depending on ones situation..
suppose your now nearing 75 + ,retired ...made loads of smart investments/ have the annuity / have a huge pension/ social sec./ house long paid for/ minimal monthly expenses...If its something you enjoy..why not ?

taking money out
 

Hi all- interesting topic for sure. To Rats60, bad news! We seem to think
alike at lot of the time:) In all candor, I have yet to take money out of a
retirement fund to buy a card (or comic book, etc) but I cannot fault those
who have. Finances are an intensely personal thing, too complex for most
individuals to lay out in a net54 post. Most folks who claim to "know"
financial markets should immediately be disregarded out of hand, they
"know" zero. Depending on the specific person's means, a withdrawal he/she
approves for the purpose of buying an extravagant collectible, cannot be
dismissed out of hand as a "bad" decision. I'd be willing to wager that many
of you have family members/friends/coworkers who have made
spectacularly unwise decisions for buying spur of the moment items with
retirement funds (insert item "X" here). How can a card with real investment
potential be a worse buy, than classic forehead slappers we all possess
knowledge about? In fact, that could be a compelling "Off Topic" thread
itself- what's the dumbest thing you can name, that someone frittered
away retirement funds to buy? What could possibly go wrong with that
topic:)? Trent King

Incredible how a completely broken medical system destroys the retirements of good people who worked hard their entire lives and saved, yet every time a politician says we have to reform the way medicine is dispensed in this country he or she is shouted down, mocked, belittled . . . . It's just mind blowing.

If you bought and have continued to buy over the past 5 years higher-end/grade-centered non-oddball Ruth, Cobb, Jackie, Mantle, and Mays you have never lost. You have won, with a high percentage of winning big. Limited supply with large demand. People always want them and the people that have them don’t want to let them go unless you pay to the moon.

I invest in those names and grades I collect what I love. Collection of Cards and an Investment Section of Cards.

America!
 

I guess the beauty of living in a free country is that you get to choose how to spend your time and financial resources. And nobody can force you otherwise. Your mother and wife might try, but even their influence has limits. And the beauty is that all of our actions have consequences. If I make brilliant choices, then I reap the rewards. If they are foolish, then I suffer accordingly. Sometimes it takes years or decades for the natural results to manifest, but the law of the harvest is just as true today as it has ever been.

If you decide to pull your cash out of retirement and put it into cards, then God bless you. I really hope it works out well for you financially. And if not, then hopefully you can derive some pleasure in just having the cards.

And for those of us that under-allocate to cards and over-allocate to other assets, hopefully our choices work out for us as well, and we don't look back and wish that we had just let it all ride on cardboard.

Happy collecting, and hopefully we can all enjoy a well-deserved retirement when the time comes, hopefully sooner than later, free of financial worry, and replete with hoarding cardboard and arguing with strangers online about piffle.

I think this discussion about speculative assets misses the point, because the real issue is productive assets v. nonproductive assets.

I've always found this discussion by Mr. Buffet to be enlightening from the 2011 shareholder letter, so I'm pasting it here, as it highlights some key differences between asset classes, which appear to be germane to this discussion about investing in cardboard v. other asset classes. It's a bit lengthy, but I've always found it to be insightful:

Investment possibilities are both many and varied. There are three major categories, however, and it’s important to understand the characteristics of each. So let’s survey the field.

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.”

In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control. Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income.”

For tax-paying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor’s visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It’s noteworthy that the implicit inflation “tax” was more than triple the explicit income tax that our investor probably thought of as his main burden. “In God We Trust” may be imprinted on our currency, but the hand that activates our government’s printing press has been all too human. High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments – and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label. Under today’s conditions, therefore, I do not like currency-based investments.

Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is $20 billion; $10 billion is our absolute minimum. Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain – either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we’ve exploited both opportunities in the past – and may do so again – we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: “Bonds promoted as offering risk-free returns are now priced to deliver return-free risk.”

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century. This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future. The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end. What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while. Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion.

Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard “cash is king” in late 2008, just when cash should have been deployed rather than held. Similarly, we heard “cash is trash” in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference – and you knew this was coming – is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola, IBM and our own See’s Candy meet that double-barreled test. Certain other companies – think of our regulated utilities, for example – fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce. Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety – but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest.

Nicolo, yes, and a fabulous analysis thank you, but everyone isn't 30 years old with a 40 year investing horizon.

This is so brilliant

Here's the thing: we all see what we want to see.

Dollar-based assets are terrible, unless they aren't. My wife's grandfather, who was a machinist, got lucky and bought a mess of Treasuries when interest rates were over 10%. When inflation came down, he ended up with a big winner.

Hard assets, also terrible until they are not. Case in point: gold. The inflation-adjusted price of gold was equivalent to over $9,000 an ounce in 1979-1980, at its all-time peak. My father bought a tube of Krugerrands in the mid-1970s and sold it a few years later for a giant profit. Timing was everything.

Income-producing assets, really dependent on what the asset is and the degree to which it is subject to outside forces. Take rental real estate. Big asset with a track record of performance. Until it hits a wall of political resistance. Like rent control or the shelter in place eviction freezes of the pandemic. Even a dirtbag tenant who uses the non-emergency law can remain in place for months before he can be dug out of the property (my clients have had more than a few of those). No income and you still pay the carrying costs throughout. If you have a thousand units, you can handle it readily. if you have a single building, a few nasty deadbeats and vacancies can kill you. I know of more than one real estate entity facing capital calls due to cash flow issues stemming from losses of tenants and inability to evict deadbeats.

None of it is assured, it just depends on timing and specific risks to the asset. That's why you have to diversify and take profits. At the recent Burbank show a guy came to my table wanting to trade. He opened his custom Zion card case (which they all have now) and pulled out a stack of limited-edition autographed cards...of Walker Buehler. Oops! Probably should have traded some of those when the profits were there and picked up other players, like Tatis. OK, bad example.

You know what is concrete, though? Paying off your debts. Borrowing to invest is a fool's errand for average people. Debt for baseball cards? Puh-leese: that box break is not going to beat the credit cost. Again, back to my wife's grandfather, not a sophisticated guy but knew from the Depression that debt was the key. Own your stuff and owe no one. That's how you weather downturns. He paid off his house and saved to pay for new things. Not very fashionable, but he paid for both his granddaughters' college after their deadbeat dad walked out, and left enough money to secure his grocery clerk daughter's retirement, too. That's what I aim for: to own my stuff and not to owe jack-squat to anyone, maybe leave a legacy for my kid. Of course, it will probably be Ruth cards...

Near the end it won't matter
 

Yep--Spend it all before the Nursing Homes can get it--for six years of care it cost my late mother-law around $460,000, her nursing care insurance policy did help!

And I don't want to end up eating cat food and cardboard when and if I make it to 80. Thanks for the sage advice.:)

If you had invested 50k in a 1952 Topps Mantle 31 years ago, you could have 12 million dollars today. If your are happy with 10x in 30 years instead of 200x or more, that is your choice. I think retirement with ~10 million would be a lot more enjoyable than one with 500k.

Easy to pick the one card or one stock that has gone up ridiculously to make an argument for an entire class of assets. I am sure many people have bought individual cards for $50,000 and they cratered. Same with stocks. For every 52 Mantle and Amazon there are many many under performers or simply ordinary performers.