Comic Investing Tip #14: How Do Develop Your Investing Framework

A framework is nothing more than a set of criteria that helps you made decisions. Most of us will have some kind of internal framework that we rely on for our comic purchases. Some called this “gut feel”.

The difference between gut feel and a formalized framework is simply spelling out the variables explicitly. Investors can then look at these variables and consider their validity.

Now, anyone can develop a useful framework once they have spend enough time in the hobby. The difference between a good and bad framework lies in the amount of details the framework has.

An example of a bad framework will be: ” all newsstand comic books are great investments because their prices are rising”. In this case, the only criteria is newsstand.

A better framework will list out the criteria that makes one newsstand comic better than the others. For example,

  • the year of the newsstand
  • the significance of the issue
  • the print run of the issue
  • the popularity of the character etc al.

In the following, I explained more about where you should use framework and how to develop one yourself.

Where to use framework

The main purpose of using a framework is to have a greater clarity on what to invest in, based on objective criteria.

Frameworks are the most useful for new segments of comic collecting that do not have a long history. Without a framework, these new areas seem like a wild wild west where everything goes.

The above is why all of my frameworks are for new areas instead of established segments such as high grade silver age/bronze age comics. These traditional areas already have pre defined keys and history so getting into them isn’t too difficult, even with no framework.

However, when it comes to something new, such as modern comic investment, things cannot be pretty random. Books heat up and cool down pretty quickly so it is easy to get caught with books that nobody wants.

How do you decide which modern character have legs, rather than a flash in the pan? This was the reason behind my PSM model. In fact, take a look at the frameworks I have developed and you will see it is mostly are about new segments.

Developing the framework

All framework starts with 2 board areas which are:

  • supply criteria
  • demand criteria

For these criteria, an important thing is to use as much objective based evidence as possible. This allows your framework to easily compute results that can be compared across books. Any criteria that is vague will lead to poor comparison.

Now, lets look at each criteria in detail

Supply criteria

Supply criteria is the easier of the 2 areas to work. Usually, these include:

  • Print Run
  • Ratios based on different criteria

As an example of the use of both items, you can refer to my CGC 9.8 investment framework. In that article, I highlight 2 important supply side which are:

  • CGC census number
  • 9.8 to total submission ratio

Both items’ main purpose is to let us estimate the supply so that we can filter out comics that are more scarce. The more items you can develop, the more accurate your supply picture will be.

As an example, I am going to add the CGC to supply ratio to the above framework. The purpose is to take into account the print run of the issue beyond just the census number. After all, the higher the print run, the more likely there will be more 9.8 copies.

Depending on what is your investment focus, you will need to develop different supply ratios to look at.

Demand criteria

Demand factors are more difficult to estimate because they are not visible. Instead, we need to rely on different proxies to let us know how much demand there is.

In my PSM model, my demand criteria is the character’s comic appearance. If you want to read more about my reasons for selecting this metric, read this article here.

However that is not the only metric you can use. Depending on your investment focus, there might be metrics that better capture demand.

For example, in my 2nd print framework, I cannot use the character comic appearance metric since both the first and 2nd print have the same number. Instead, I use the following factors to estimate demand

  • Relative prices of both printing: the hypothesis is that if the first print has high prices, it indicated that the market has already bought into this book. The 2nd printing, no matter how scarce, will have problem attracting demand
  • Cover art: a different cover art tend to stimulate more demand

I can go one step further to develop some kind of scoring based on the above 2 factors so that I will have one metric to work with.

This is how you can develop your own demand side criteria.

Other areas in need of frameworks

What I have developed is just what caught my interests. There are still areas where there is buying interest but severly lacking a systematic way to analyze the opportunities.

  • Classic covers: Investing in classic covers is a well established way of buying comics. However, what does a classic cover entail? More importantly, how does a book can gain a classic cover status?
  • Variant covers: This is also cover driven as most variants are about the cover. However, print run plays a more important role here than in the classic cover space. How does one determine which variant can become a long term winner vs just a short term pump?
  • Comic universes: This refers to investing in areas that are non Marvel or DC. I made an attempt here for the Star Wars Universe but more needs to be done. For example, how does one determine whether Star Wars universe vs Turtles universe has more potential? Currently, there is no answer which is why most just purchase what are currently being discussed.

Conclusion

Frameworks are lens that can help collectors decide on how to allocate their capital across a sea of opportunities. Right now, most do not use them, resulting in a very mixed and non focused collection.

While there is nothing wrong with diversity, imagine what can be accomplished if you invest in only the books with the most potential.

2 thoughts on “Comic Investing Tip #14: How Do Develop Your Investing Framework

    1. Thanks Mike. Something unfortunate did happen but the family is on the recovery phase now so it is not as bad.
      This is also why I am more time than before to start writing again.

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