I believe some clarification is owed to QS Insiders on some conflicting rationale I have provided in the past. The inconsistency revolves around what I call a “success” in MTG Finance and what I consider “failure”. Or, better put, “suboptimal performance”.

Through some enlightening feedback from the editors here at Quiet Speculation, my motivation this week is to reconcile these differences by admitting my faults and turning toward a more precise objective going forward. Hopefully the new viewpoint will shed some light on my thought process.

Perhaps it will also give you a better glimpse at my objectives, which in turn provide context to my MTG investing decisions.

The Disconnect In Logic

On the one hand, we are all after a similar goal involving reduced or even positive cash flow from this wonderful hobby.

Often times I’ll quote one of my favorite truisms: the goal is not to make the most money possible; the goal is to make money.

This quote is the basis for many of my MTG Finance decisions, such as my large investment in Innistrad Booster Boxes and my inclination to sell a card for any profit to eliminate risk from my portfolio. For me, having the ability to sell a card imminently for profit is more valuable than the prospect of gaining more cash later--it’s the old proverb a bird in the hand is worth two in the bush.

On the other hand, time and again I will communicate disappointment in an MTG investment due to lost opportunity cost. Sitting on nineteen Innistrad Booster Boxes made me money, but the annualized return on this investment was painfully small compared to many, better choices. I constantly reevaluate my portfolio allocations based on past performance, condemning myself for choosing incorrectly.

In reality, this self-deprecating mindset is unfair. Hindsight is always 20/20, and regretting my purchase of Innistrad Booster Boxes because a position in Foil Liliana of the Veils would have performed more favorably is a existential viewpoint at best. This comparison completely erodes my previous stance that my goal was to make money, not the most money possible. My risk aversion dictates this must be so.

In fact, if I really wanted to pour on the feel-bads, I could unfairly evaluate my portfolio performance against some of the best performing assets throughout the past year. How about Orzhov Pontiff or shares of Plug Power, Inc., a stock I have been following for over a year now?

It’s inappropriate for me to expect to predict the above outcomes consistently. And with my general aversion to excessive risk, I simply cannot hold myself to this standard. I made a strategic investment in a low risk asset by purchasing Booster  oxes and the yield was precisely in-line with expectations.

These boxes were, yet again, another profit generator from my pastime--this should be viewed as a success and not a miserable failure, right?

Opportunity Cost is Still a Thing

While it’s true I should be content to make profits on low-risk positions like Booster Boxes, I cannot disregard opportunity cost altogether. I am 100% certain there are other low-risk assets I could buy into which may yield better return in the next twelve months. By buying Innistrad boxes, I followed a strategy which required minimal effort. Once purchased, the boxes sat in a tote or on a shelf for a couple years.

At the time, this investment fit my lifestyle perfectly. My son had just been born and I wanted to stay in the MTG Finance game without having to invest hours of time into the hobby. Booster Boxes were a great way to maintain MTG exposure while also freeing up time to spend with my newly expanded family.

Now my son is older and I occasionally have more time to pour into this lucrative hobby. Continuing to invest in boxes could be considered a lazy approach. I need to learn from my past experience and shift my focus toward positions with greater potential.

Certainly I can still maintain a lower risk profile, but I should achieve that goal by diversifying. Placing all my eggs in a basket like Return to Ravnica boxes, for example, would likely provide me with yet another disappointing year of returns. While there may not be a safer place to park a thousand bucks right now, I can guarantee there are safe alternatives that will yield better returns.

Even though I made money buying and selling Booster Boxes, I cannot neglect opportunity cost completely. Sacrificed liquidity can also be a major drawback, because a purchase in something like booster boxes may not yield profit for many months. Shipping and fees force the wait time to lengthen even further.

Sometimes life circumstances could dictate that Booster Boxes are a perfect investment. But if those circumstances aren’t evident, one should take a step back and consider alternatives. The opportunity cost associated with a booster box investment is simply too large to blindly accept.

Going Forward – Turning a New Leaf

I do have a position in Return to Ravnica Booster Boxes. Nine of these beautiful, blue sealed boxes currently sit on a shelf in my basement, next to two Avacyn Restored Booster Boxes. Despite this still-sizable position, the relative percentage of my portfolio in sealed product is significantly reduced.

Moving forward there will always be a spot in my portfolio for sealed Booster Boxes. They add stability to a volatile class of assets and provide an ideal avenue for diversifying risk. But the days of 50% portfolio allocation to sealed product are long gone. Tying up that much cash in something I’m unable to sell profitably for months is way too unattractive.

Based on my experience with Innistrad boxes, I’ll turn my focus to a more liquid and more diversified approach. Although they are all relatively low-risk buys, the diversification yields greater liquidity and better chances for short-term gains.

This is why I’ve shifted focus to Theros block temples, dual lands (which have recently pulled back nicely), and Vintage staples. Thoughtseize also plays a great role in my portfolio, providing some safety with opportunity for a reasonable return in the next three to six months.

In the meantime, I'll continue to seek opportunities for immediate gain via quick flips from hype and arbitrage. Recently this has taken the form of a quick flip on Goblin Rabblemasters and arbitrage on Power between Europe and North America, or even dual lands between the U.S. and Australia.

These moves couldn’t be possible if I had all my funds tied up in illiquid assets like Booster Boxes. That’s not to say Booster Boxes don’t belong in a diverse MTG portfolio. But I am committing to maintain these investments to a smaller percentage. They’ll make me money eventually, and for this I will be pleased.

But in the meantime I can focus energy on other opportunities which will provide even greater returns. Therefore, when the next opportunity comes along to double up on foil Liliana of the Veil, I won’t be left regretting my decisions because opportunity cost won’t be holding me back.

Summing Up My New Attitude

I’m still after the same end result: to make money from Magic. This isn’t changing. My attitudes around how I achieve this are morphing, however. Instead of jumping onto any wagon that may take me to a land of profitability, regardless of transportation time, I’ll divide my resources onto varying forms of transportation. This way, I won’t regret missing other opportunities due to a lack of cash.

Once the opportunity cost barrier is broken down, the premise of regretting missed opportunities should evaporate entirely. There will still be boats I’ll miss. Often times these trends could not have been predicted with high confidence. Even major retailers did not anticipate the impact of M15 on Terra Stomper, for example, so there is no reason for me to regret this missed opportunity.

While Terra Stomper could have yielded significant returns, I am confident there will be other opportunities in the future with a more attractive risk/reward proposition.

As long as we learn from history, we will be better prepared to take advantage of future opportunities. As long as I internalize what I observe, I won’t hold myself to unfair standards. I’ll continue to make profits from MTG through a diverse approach, and that will be sufficient.

…

Sigbits

I used to disregard cards that were mostly 1-ofs in only one or two specific archetypes. It’s time to shift away from this attitude, however, especially when looking at older cards. Despite the turmoil in Modern card prices of late, some older 1-ofs that have continued to dodge reprint are getting relatively expensive. Spellskite being the poster child for this trend, of course.

• Other than the occasional Modern appearance, I have no explanation for the explosion of Orzhov Pontiff. Star City Games is now sold out of nonfoils at $3.99 and NM foils at $24.99!
• I suppose a quick comparison of Orzhov Pontiff with another 1-of in Modern, Ranger of Eos, could shed some light. The Ranger is not sold out, mind you, but he does retail for $14.99 despite coming from a more recent set. Perhaps the Pontiff’s price increase has been long overdue.
• Another 1-of in Modern that has shown some price growth is Eye of Ugin. The land is played in Tron builds to fetch up Eldrazi when it’s time to win the game and has earned a price tag of $9.99 at retail.