Comics as Emotional Assets

In a recent Financial Analysts Journal article authors Elroy Dimson and Christophe Spaenjers provide an excellent analysis of the historical performance of artwork, stamps, and antique violins. The authors label these collectibles “emotional assets.” No, the authors did not include comic books in their study. However, the article offered a few interesting insights that apply to us comic book collectors.

In a recent Financial Analysts Journal article authors Elroy Dimson and Christophe Spaenjers provide an excellent analysis of the historical performance of artwork, stamps, and antique violins. The authors label these collectibles “emotional assets.” No, the authors did not include comic books in their study. However, the article offered a few interesting insights that apply to us comic book collectors.

I think comic books are a great example of emotional assets. They’re not like stocks or bonds which can be analyzed and valued using somewhat of a scientific framework. But on the other hand they’re not like other collectibles such as Thomas Kinkade paintings or Beanie Babies that have quick booms and busts. The comic art form has endured and grown for over 70 years. The heroes within the pages are woven tightly into our pop culture fabric. So they’re not quite stocks or bonds but certainly as legitimate as other collectibles such as stamps, violins or fine wines.

Perhaps the most interesting tidbit from the article is that the authors found that violins, artwork, and stamps all outperformed other ‘legitimate’ investments such as gold and bonds between 1900 and 2012. These three emotional assets grew by about 6.5 – 7% per year vs. about 5% for gold and government bonds. It’s no secret that comics have been performing very well over the last few years. It’s an impossible task to calculate the historical performance of comics but by just looking at historical guide values over the years and the actual auction values today versus 20 years ago I’d bet the returns are right up there with the three emotional assets discussed in the article, if not much higher.

The authors cite a 2012 survey by Barclays that found that emotional assets account for 10% of a typical high-net-worth individual’s wealth. I’m not sure if in this case wealth is equal to total assets or net worth (assets minus liabilities). I’ll assume net worth. What percent of your wealth is invested in comic books? Think about your house, cash, investments and other assets and then subtract your mortgage and other debt. What’s the value of your collection as a percent of what’s left over? My collection is far below 10%. What percent of your net worth do you feel comfortable allocating to comic books or other emotional assets? What’s preventing your from raising your allocation to comics? Or if you have close to 10% of your net worth or even more invested in comic books, why are you so comfortable with such a large allocation to comics?

A few big purchases of Silver Age or Bronze Age keys and an investor’s collection can easily exceed several thousand dollars. So the big numbers involved demand they be treated as more than just as a passing hobby. Think about comics—and other collectibles—in the context of your total wealth. The main driver of your retirement funds should be stocks and bonds. Comics and collectibles are tons of fun to collect and as an added bonus represent an alternative store of wealth. Next time your significant other scoffs at your recent comic book purchase, simply say, “I had a look at our allocation to emotional assets and concluded we’re underweight. I’m simply re-balancing our portfolio!”

 

References

Dimson, E., and C. Spaenjers. 2014. “Investing in Emotional Assets.” Financial Analysts Journal, vol. 70, no. 2 (March/April):20-25.

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R.J. Steinhoff
RJ Steinhoff is a lifelong comic book fan and when he’s not working for a living he runs the comictrend.com website.
Articles: 23

6 Comments

  1. Nice post R.J.

    Over the last 10 years I’ve been trying to assemble the Marvel Keys of the Early 1960s. I was lucky with most and picked them up before they really spiked these last few years. To tell you the truth I’m not sure what to do with them. The thing is even I, a comic reseller with my ear supposedly to the ground, am not sure whether I should hold these as retirement instruments or sell them and invest into “real” investments like Mutual Funds, Real Estate, Stocks etc.

    High end comics have outperformed the general market recently, maybe I should assume this will continue.

  2. Everyone’s situation is different. For me, liquidity is a big factor. With stocks, you can click a button and cash out at any time. With comics, it takes time and often involve some haggling. So, I think its good to have a mix of assets.

    There’s a lot of talk about a pending correction in the financial markets. With stocks and real estate at their all time highs, what goes up must come down. The only question is when and how hard. Bankers and agents all know this but they all have a vested interest in keeping the party going. Still, the report this morning is that home sales in Toronto are up about 6% year over year.

    It’s fun to try and time the market… but for serious investments, I personally believe in the “buy and hold” theory.

  3. i always wonder why people like to measure against gold … since pre-1971 it was fixed, was considered money/convertable and was not an investment. after 1971, it’s a different story. gold having gone from 35$ to 1300$, or ~9% compounded pa.

  4. whichever,whatever,traders edge,h.f.t,buy and hold,all bore me.comic books stimulate,fires me up! Rosebud!

  5. Great post. Some comments on it and on the comments:

    “They’re not like stocks or bonds which can be analyzed and valued using somewhat of a scientific framework.” Absolutely and totally disagree. At this point I think the >$100 book market is more dispassionate than the stock market. It is easy to argue that there is no “inherent value” for comics (my wife is familiar with this argument), but the inherent value of equities is similarly difficult to pin down – in both cases they are worth what others will pay for them. GPA’s extraordinary data set makes it clear to me that there is great regularity in the behavior of comic prices. If you combine this with CGC’s population data, you can get a very good handle on relative value. Similar to the stock market, this won’t tell you what will outperform, but you can get a very good picture of the current state of the market, and most importantly, not overpay.

    Let me pose a related question that I’ve been thinking about a lot: if CGC books are unreadable (and reading them would destroy their value anyway), and it is easy to see the books’ covers on web sites, why do we want to have the physical books in our possession? Similar to the gold in the New York Fed’s vault, which is owned by various parties but never leaves the vault, what if there were a climate-controlled repository for CGC books owned by individuals? How different would the experience/value be? And why? (I am _not_ arguing for this approach – the “emotional asset” character comes through clearly – but I think it is a good exercise for each investor/collector to try to clearly determine why this model is repellent.)

    To Walter’s point I would generally agree with Charlie’s response. Comics are highly illiquid speculative assets. However, the market is well-established as R.J. points out, so I think it is unlikely barring a catastrophe to disappear quickly; what is possible is an extended period of severely depressed prices. I don’t think there is anything less “real” about comics than the other asset classes that Walter mentions, it is their volatility and liquidity characteristics that I would be concerned about. For an “average” collector of moderate means, I would think that they shouldn’t have more than about 10% of their net worth tied up in comics or other collectibles, but this percentage could be increased with the holder’s interest/sophistication in the class of collectibles (e.g. Walter), or with the holder’s wealth. (If you have a $10mm net worth and you want to have $3mm in comics, knock yourself out.) On the other hand, I don’t think Charlie’s comments “what goes up must come down. The only question is when and how hard” have a lot of meaning when considering any assets. People have lived and died waiting for Action #1 to come down. It is easy to point out “bubbles” after the fact, but if they don’t pop, the hard fact is you stayed poor while the investor in the “bubble” got and stayed rich. I actually think it is easier to identify clearly “too low” values than “too high” ones, partly because “too low” is bounded at zero. My overall point is that I think comics are a legitimate portfolio component as long as you follow the common advice that you shouldn’t concentrate your assets in them to the point of pain, and you should value them regardless of price – similar to the advice “make your avocation your vocation”, if you truly dig the books, you are going to outperform the disinterested speculator who is just buying because they can see the appreciation on the charts.

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