So, are legos a good investment now? Let’s find out with this guide below.
What Is Lego?
Lego is a kind of plastic toy that you can buy either as groups of individually different shaped bricks in order to design your own masterpiece – or buy themed Lego such as Jurassic Park or Star Wars.
The fun is in the creation. Legos give you the ability to make whatever your imagination can conjure up, but when you’re building with themed Legos like Star Wars, you can fulfil your Star Wars related fantasies with the available bricks.
It’s marketed to children but adults enjoy Lego too. With such popularity, it has seen a boost in price for certain Lego items and people have wondered if they’re worth buying and keeping in mint condition now, or even buying old mint condition Lego sets – in order to make a return over time.
Like with Pokemon cards, it was a massive fad decades ago and lost all popularity – until, seamlessly out of nowhere, it seemed to have rocketed in both popularity and price. A $5 pack of cards can now cost thousands of dollars from private sellers… and people are buying them!
Are Legos A Good Investment Then?
There’s a school of thought on this. It’s quite debatable but there are more negatives than positives from the seams of it. However, it’s worth looking at all the reasons.
Common Misconceptions
We’ll begin the guide by examining the common misconceptions about the investment of Lego
It’s Difficult To Find A Buyer
Much like many other hobbies, Lego collections can get really expensive. It wouldn’t surprise anyone if you walked into a store and spent $250 for a set you or your children really like!
The problem is, you’ll find it very difficult to find somebody who is going to spend twice as much or three times the amount of money that the original set cost! You’d probably think it’s common sense that if you spend hundreds of dollars on something and keep it in pristine condition, that it’s going to become increasingly valuable, right?
Not necessarily…
Lego investors keep a keen eye on what’s going on with the market, along with tools like Brickpicker that can check the demand of Lego at certain points of their shelf lives, along with long after.
Easiest way to describe it is that if the demand is high, the supply eventually will run out. When things that everybody wants are difficult to get – the price of the product can skyrocket with private sellers or other stores.
If a set was selling huge numbers in one month and was plenty stocked, it wouldn’t be as valuable, particularly not to Lego investors. They don’t need Lego to sell in quantity – they simply need demand to be much more than supply. The problem is that most retailers don’t tend to sell a set past its shelf-life as a toy, so any supply must come from the investors.
In other words, the likelihood of making money out of the resale of Lego is quite high with the gap in the market.
There’s Only A Few Types That Are Worth Investing In
Many people would tell you that any non-licensed, themed Legos are worthless for investment because it’s the license name that makes the money. It does make some sense and licensed names will certainly add some value to a product. When we say licensed names, we’re talking about things like Star Wars.
The thing is though, that long past the shelf life of licensed names – they will continue to sell due to fans of that particular theme. What people don’t realize is that non licensed Legos sell more units than they recognize. Many office buildings or student digs have plenty of non licensed Lego sets like building a famous skyscraper or something in New York.
The point here is – the market isn’t as small as people think and it’s not all about licensed names.
The Return Of Your Investment Is Pennies Compared With Stocks
Let’s take the stock market where you may earn an estimated 10% return annually. You may be surprised to learn that Lego returns can dwarf this.
Of course, it will largely depend on what your strategy is and business plan. So, for a basic example – choosing to sell on Amazon will deliver more of a return than selling on eBay.
Due to the nature of Lego investment, you can’t necessarily determine what the rate of return will be. However, there have been many notable examples of returns. Some have had 100% ROI.
Take a look at some of the Star Wars lego sets. The Imperial Star Destroyer in 2011 was valued at $270 – a decade later, it was valued at $1,500. You’ll notice an annual return of nearly 19% – and this is basing it on the price charged at RRP. You may have purchased it cheaper than this, making far more of a return.
The Millenium Falcon originally priced at just under $500, after 8 years post-shelf life was valued at $3000 – totalling a quarter return every year. Overall, that’s 5x the amount!
So,
Stocks = around 10% return
Lego = around 500% return
At least in that example.
The biggest though has to be the Lego cafe corner which once priced at around 140 bucks, sold for 1600 dollars. Amazing!
The key is to find the sets that are soon to expire on the shelf (retired products) and then purchase them. Of course, the longer post-shelf life you hold them, the return could be much higher. It’s a strategy that some people do, whereas others will try and have a shorter holding time (within 24 months) and sell it there.
Nobody Cares About Lego
Some people may claim that Lego is falling out of favor with potential buyers. The problem is with this theory, that Lego two decades ago was actually less popular than it is now, according to the data. With its strong links with its partners and affiliates, it is constantly bringing in new customers and more audiences. Not to mention, people who love licensed themes that Lego sell (like Star Wars) – the sales will continue to grow.
There’s Way Too Many Sellers Of Legos
This is a fair comment, but it’s not without its flaws. Indeed, there are plenty more ways to sell things such as Amazon, eBay, CraigsList, Gumtree, Facebook Marketplace, Walmart Seller Center and the list goes on – but even with these and influencers selling via social media and YouTube, the simple truth is the demand for sets of Lego outweighs the supply pace by a huge margin.
Put these facts with the increase in popularity of e-commerce sales, the soaring popularity of Lego and plenty more people out there trying to get hold of Lego to use their entrepreneurial platforms – Lego seems like a growing market. If you’re savvy, you’re going to make some money!
Negatives To Lego Investment
There are of course, negatives to all things – especially when it comes to financial decisions. Consider these points when it comes Lego investment:
It’s Not An Instant Return
Some people like snatch n’ grab styles of returns. The thing with Lego investment is that you may be waiting some time before seeing a return, which means initial investment. This means you’ll need some capital behind you before going out there and spending on Lego sets.
Unregulated Market
Unlike the stock market, this is unregulated – so the only things people abide by are the consumer laws. The problem is, some people are fraudsters and may break the law and take your money. Often, unfortunately, you may not see that money back. Think carefully before handing over money to somebody you don’t know, if that’s how you’re planning to buy them.
Storage Problems
One really annoying thing about this kind of investment, is that you can’t take the Legos out of the box to play with them! Even if you badly want to build the sets, it loses its value instantly as soon as it’s opened.
The issue here is that you may need to find a safe storage space for these Lego sets, where the box won’t be damaged by temperature, general wear and tear or opened by children in the house.
Risky Market – Capital Is At Risk!
If you’ve ever invested in anything, you may have read the phrase “your capital is at risk”. This is because… it is.
You could go out and purchase a $300 Lego set and never see a return on it, unlike some other sets you’ve seen dream stories of.
Summing Up
Investing in Lego can result in huge returns, but like with any investments, there is also the risk that you’ll lose your initial investment – or even damage the investment at home by accident!
Always be wary of this type of market, and ensure you do your research if you’re going to step into the world of Lego investment. Good luck!
Hi, my name is Matt Roberts, and I have been a financial analyst and advisor for the past 7 years.
While my job is based within the money industry, in my spare time I enjoy looking into potential new investment opportunities. From cryptocurrencies, to purchasing vintage cars, everything has the potential to gain you money if you are wise and make the correct investment decisions.
Through this site, I hope to educate others on investing in general, and hope to provide others with useful information that can benefit them and the opportunities they have. If you are not confident with finances, investing money can be a daunting step, however, it is a lot easier than many people are led to believe.
