Investment Ideas #2 : Disposition Effect in Comic Book Investing

Disposition Effect in Comic book Investing  

This behavior concerns the tendency of people to hold onto comic issues rather selling and acknowledging how little it is actually worth. 

Comic book investors have a tendency to hold onto investments that have fallen in price, regardless of how unlikely it is that they will ever recover in value, rather than selling and acknowledging the loss. The inverse is true, and can be just as damaging: we’re more eager to sell our comics when they are going up, regardless of how much further up they might go.

Every price point is not a single point at all but that price point needs to be seen as a distribution of possible future outcomes. A comic's price is not static as changes will occur. 

Collectors hold onto their losers and cut their winners short. 

Investors should do the reverse. 

Part of your portfolio building process should be to go through your collection on a regular basis, figure out which issues are the winners and which are not. Sell or trade the losers. The sold issues then will be a source of seed capital for buying the next round of winners. That is called having an exit plan which must be a part of your portfolio building.

That is assuming you have kept an investment diary and know you can make money in comic book investing. 

If you can not make money then just buy and hold and let your relatives/family sell your collection after you are gone. They will have no bias to deal with as its all a win to them!

An investment plan will track your initial purchase as well as how you’re going to respond if the 

1) price goes down (Sell it when it drops a certain percentage? Buy more issues when it dips lower?

2) and if the price goes up (Sell it when it gains a certain amount? Wait to see how high it goes, selling when it starts to dip from its peak?).

Building a Portfolio, having defined plans including exit strategies and preforming timely assessment of your investment plans will allow you to move away from the Disposition Effect.

My up-coming book on investing in comics will have an informative section on portfolio, exit and investment plans, and identifying and dealing with cognitive biases. 

Good luck with your investments!


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