Over a 10 week period, I bought and sold 33 different Magic: The Gathering cards. In a previous article, I recapped some of the hits and misses after selling a majority of the cards. The final cards I was holding were likely to lose money and lower the overall profit. I ended the speculation test after attending the Star City Games Summer Convention in early June, 2019. This event was an opportunity to sell off any remaining speculations without incurring shipping costs or seller fees. In the final article of this series, I will review the overall performance and my thoughts regarding the test. A copy of my updated speculation sheet is available here.
I believe it is important to understand how to evaluate and measure performance. One method of evaluating an investment is by comparing its performance against a similar investment. However, I do not have specific information on the performance of other MTG speculation portfolios. Another option is to compare the performance of an investment against other investment opportunities. In my Masters of Business Administration program, we often use the S&P 500 market index as a benchmark for comparing an investment's performance. While the S&P 500 is not a collectibles market index, it is an alternative investment to MTG cards. I will use this market index to evaluate my speculation test performance.
The speculation test ran from April 3, 2019 to June 10th, 2019. An article on Seeking Alpha used a Monte Carlo simulation model to predict a 2.38% increase for the S&P 500 over the second quarter. Using this forecast as a baseline, I should expect my speculation test to achieve a profitable return higher than 2.38%. Otherwise, it would be a potentially better alternative to put $188.11 in a S&P 500 market index fund. I would like to note that this assumption does not account for the time it takes to buy and sell cards. Personally, I would goal a higher return than 2.38% to account for the additional opportunity cost of my time.
Between April 3, 2019 and June 10th, 2019, the S&P 500 increased by 13.33 points for a 0.05% gain. When looking at the entire second quarter, the S&P 500 increased 93.13 points for a 3.3% gain. The S&P 500 did not beat the forecast for my speculation test's time period, but it did beat the forecast for the entire second quarter. I will compare my speculation test results against the total quarter gain of 3.3% for the S&P 500.
Overall Performance Results
The speculation test consisted of cards bought for purchase, personal use, and with a promotional discount. I will share the overall performance results including and excluding certain cards to show their impact on net profit.
Overall Performance Including All Cards with and Without the Promotional Discount
The total purchase price for all cards was $188.11. The net profit of all cards was $20.06 or 10.7%. By adding in the credit card kickback of $2.71, the adjusted net profit is $22.77 or 12.1% A promotional discount of $6.56 was applied to Queen Marchesa and Lux Cannon. Adding back the promotional discount results in an adjusted total purchase price of $194.67. The adjusted net profit changes to $13.50 or 6.9%. Applying the credit card kickback of $2.71, plus 1.5% of $6.56, the net profit adjusts to $16.3 or 8.4%.
Overall Performance for Sold Cards
The purchase price for only cards sold was $166.64. The total net sales for the group of cards sold was $186.70. This sales total resulted in a net profit of $20.06 or 12.0%. Adding in the $2.39 credit card cash rebate at 1.5% results in a total net profit of $22.45 or 13.5%. This was my maximum return when looking at only cards that were bought and sold. By excluding the credit card kickback and removing the promotional discount of $6.56, the adjusted net profit is $13.50 or 7.8%. Adding in the credit card kickback, plus 1.5% on $6.56, results in an adjusted net profit of 15.98 or 9.2%.
Reflection of Overall Performance
Using the lowest calculated net profit margin of 6.9% (or 8.4% with credit card kickback), the speculation test performance beat the S&P 500 return during the same time period. In addition, I was able to earn enough money from the sales and kickback to cover my initial investment. The kickback of 1.5% helped raise profit margins by offsetting some of the purchasing costs. In totality, net profits and kickback covered the costs of the MTG cards I bought to keep.
One important component I have left out is the consideration of time. I spent many hours researching, buying, shipping, and selling cards. The amount of money I profited was not enough to make even half of minimum wage. If I had bought multiple sets of each card, I may have been able to make enough profit to cover my investment of time. I believe it is important to rationalize the amount of potential profit per hour of time. In the future, I would consider speculating on more expensive cards and purchasing sets that could sell for $25.00 or more on Ebay. Another point to consider is how much time it takes in other investments to produce the same amount of profit. Buying and selling shares of index funds over the Internet through a brokerage firm is less time consuming than handling MTG cards. While it is hard to compare the various investment risks, I do not have to worry about shares of index funds getting lost in the mail.
Market Watch provides statistical performance for the S&P 500 for various time periods. Looking the one year performance for the S&P 500 on July 7th, 2019, the index gained 9.27%. I believe this percentage is important as it sets a general benchmark for holding long-term speculations. If I was purchasing singles to hold for a year, I would only consider cards that had the potential to earn a net profit higher than 9.27%. Otherwise, I would consider investing my money in the S&P 500 index.
Regardless of the speculation test results, I had fun buying and selling MTG cards for a profit. There is a feeling of accomplishment calling a speculation target correctly. I also enjoyed compile data together to determine if a card was a strong speculation target. While my choices were not always right, I did have more success than failure.