This summer over lunch at a sidewalk cafe in New York, I was chatting with my good friend Vince and he told me that a Ken Griffey, Jr. rookie baseball card is worth $1,000!
How come I didn’t know this? As a kid, I had plenty of Ken Griffey, Jr. baseball cards. On my trip home to see my family on Thanksgiving, I’m definitely going to search through my old baseball card collection!
Lessons from Baseball Cards
Why should you care about the value of this baseball card? A little bit in the beginning turns into a whole lot over time. This is a great example of compounding.
Compounding applies to many things in life. Baseball cards, investing, time, habits – both good and bad, etc. This concept is very fascinating! In fact, Albert Einstein described it as the eighth wonder of the world. “He who understands it, earns it. He who doesn’t, pays for it.”
When the Ken Griffey, Jr. cards were issued, you could have discovered one in a pack of cards that cost 25 cents. If you weren’t lucky enough to get one in a pack, you could have bought one from your friend (who had one) for 1 or 2 bucks!
Turning $2 into $1,000 over this time frame is an annual return of 19%. This is a phenomenal return and very unlikely to be repeated. If you own the card, perhaps you want the money, or you want to know that you have a valuable baseball card collection.
Just like compounding is present in life, so are taxes! Ugh.
Taxes and Details
Unfortunately, taxes on collectibles like baseball cards, coins, stamps, etc. are unfavorable. They are 28%. If you are in a high tax bracket, you may also have to pay the net investment income tax of 3.8%, a total rate of 31.8%.
If you were to sell the card for $1,000 you would have to pay $318 in taxes. Be wary of the unfavorable rates.
The Pleasure of Collecting
When it comes to collecting baseball cards you may be doing it for joy and pleasure. Perhaps you are not concerned about taxes or the value of your collection. You simply do it as a hobby and that’s awesome!
As you watch the Fall Classic – the World Series – what other questions about compounding come to mind?