Alternative asset classes like Private Equity, Art Investing, and Real Estate have long been known to provide diversification benefits to a balanced portfolio investing approach. Ditto for historical staples like investing in commodities.

In the last 20 years especially, capital markets have witnessed skyrocketing investments into "alternative" financial instruments like Hedge Funds and new complicated Structured Products. Remember our old friend, the "CDO"? (Collateralized Debt Obligations, the investment vehicle we can partially thank for the Great Financial Crisis in 2007) - these and other similarly complex investments were all created in the name of and searching for "yield".

Thankfully, for the less sophisticated investor and the normal human beings among us, there are easier investments out there. One prime example is sports trading cards, currently a $10bn annual industry in the US.

Here is what Harvard has to say:

Collectibles include a wide range of items such as: Rare wines, vintage cars, fine art, mint-condition toys, stamps, coins, and baseball cards. Investing in collectibles means purchasing and maintaining physical items with the hope the value of the assets will appreciate over time. These investments may sound more fun and interesting than other types, but can be risky due to the high costs of acquisition, a lack of dividends or other income until they're sold, and potential destruction of the assets if not stored or cared for properly. The key skill required in collectibles investment is experience; you have to be a true expert to expect any return on your investment.

For those who enjoy collecting and have the requisite understanding of what drives value, investments can yield much higher expected returns. Here is how WeTheHobby assesses value for trading cards:

Albert Einstein famously said, "The most powerful force in the universe is compound interest". The S&P 500 averages approximately 8% annual return historically. Take a look at the chart below.

If you had invested ~$1,000 in the S&P 500 in early 2004, and done what Warren Buffet suggests most investors do, which is "consistently buy an S&P 500 low-cost index fund"...that investment (with compounding annual interest) would today be worth ~$5,000 today.

Now, let's take a look at Collectors CardLadder50, (the 50 individual cards aggregated into an index that best represents the trading card market) over the exact same time period.

If you had invested $1,000 into the CL50 index fund (assuming of course a corresponding and accessible ETF), that $1,000 twenty years ago would be worth over $13,000 today, averaging an incredible 13% annual return!

However, reward of course needs to be balanced with risk. As HBR noted above, each collector's individual skill and experience plays a huge role in realizing value. Whether increasing capital inflows into collectibles continue to demonstrate or challenge the viability of this asset class over the coming years remains an open question. What is clear is that future investment returns of participating in The Hobby is dependent on the level of professionalization surrounding the industry.

Thanks to our friends at Collectors and Fanatics, The Hobby's future looks bright.

Whether it's macro supply/demand variables or the digital engagement WeTheHobby witnesses daily from our younger consumers...we are seeing more and more entrants into the space. And that's a good thing. Because...

#thehobbyisforeveryone