Lego collecting delivers huge and uncorrelated market returns

pseudolus | 229 points

When the Saturn V rocket Lego set came out a few years ago, I decided to try this "Lego collector" market. I bought and built (and now proudly display) one set, then bought and stored another in the back of a closet, inside the shipping box. Perfect condition, I figured, for when they stop selling it and it skyrockets in value.

They didn't stop selling it. I think they never will. I'm going to be storing this enormous box of Lego forever.

Still an amazing Lego set.

mabbo | 5 years ago

Matt Levine today: https://www.bloomberg.com/opinion/articles/2019-01-17/the-co...

"Sounds great! So if I am running a $10 billion institutional portfolio how much of it should be in Legos?

">In one extreme case, a kit for Star Wars Darth Revan that retailed in 2014 for $3.99 went for $28.46 on eBay a year later -- a 613 percent premium.

"Uhhhhhhhhhhhhhhh. So the extreme case is making a profit of … $24.47 over a year? I mean, I guess you could buy … a million … of those Darth Revan sets … and … put them somewhere … but … no, I am going to say no, this is not a strategy with institutional capacity. (And you can’t use it as an additional signal in your multifactor general model of what stocks to buy, because they are Legos, not stocks.) I suppose if you are a perverse sort of finance professor though you should be using a factor model to trade Legos in your personal account; let me know—and, more importantly, brag to your students constantly about—how it goes."

kgwgk | 5 years ago

So, now that there's been an article in Bloomberg, I'm guessing we can expect future events to play out like the comic book collecting market has since it became a thing in the 1990s: A bunch of people try to build up their stockpiles at the same time, potentially driving up prices in the process. Then, in a couple decades, they also try to liquidate their collections at the same time, driving prices down to near 0 in the process.

bunderbunder | 5 years ago

Ok, interesting as a curiosity, but:

> In one extreme case, a kit for Star Wars Darth Revan that retailed in 2014 for $3.99 went for $28.46 on eBay a year later -- a 613 percent premium.

Say I'm really prescient, and know exactly which kit to collect.... can I expect to invest 400K and get that 600% return? I doubt it. Sure it's possible for 4$, or 100$, but is it possible at any kind of significant scale?

virgilp | 5 years ago

Investment markets come in to ruin yet another thing - people who just mix up Lego and play it themselves, now under pressure to keep their sets, sets.

stuaxo | 5 years ago

The analysis ignores 99.99% of LEGO that has been sold and is now worthless.

Focusing on items that have been resold would bias the analysis to show larger profits for LEGO investment.

This looks like a great example of survivorship bias.

yukonbound | 5 years ago

Certainly related, cause or effect ?

> Mar 22 2016 > Why Stealing Legos May Be the Perfect Crime > > A recent undercover sting operation busted a Lego thief in Portland, but thanks to the toy bricks' high price and the ease of reselling them online, stealing them has become a lucrative trade.

Source: https://www.vice.com/en_us/article/yvx77j/why-stealing-legos...

GorgeRonde | 5 years ago

I have a client that has a reverse logistics business buying second hand X, testing, cleaning, repackaging and then selling X as refurbished. They have been doing this a few years and created a multi-million dollar business unit with reasonable margins.

They did a trial about 3 years ago of buying separating, sorting, cleaning, repackaging and selling LEGO bricks/parts. After about 3 months they ended the trial deciding that the economics of the process just didn't work for them at any kind of scale.

What I just described is quite different than buying new LEGO sets, leaving them unopened and storing them for a few years and then selling them with the hope that some of them have appreciated so greatly that the overall collection is worth substantially more.

mswen | 5 years ago

See also "Lego a 'better investment than shares and gold'" on HN 3 years ago[0] and the various Lego investment websites[1]. Not something I engage in myself, but have been aware of. Like the people who "invest" in trainers/sneakers[2].

[0] https://news.ycombinator.com/item?id=10791057

[1] e.g. https://www.brickpicker.com/ & http://brixinvest.net/

[2] https://news.ycombinator.com/item?id=18535897

m-i-l | 5 years ago

I've been a fan of LEGO since I was a kid and have got back into in the last 5 years or so.

I wish I'd have bought more sets when I was younger as some of them sell for crazy amounts of money now. Particularly the early Harry Potter, Star Wars and Pirates of the Caribbean sets. The minifigures alone can sell for close to £100.

I dabble in buying and selling LEGO and it is true that you can make money but it's a lot harder than it used to be. LEGO makes and sells a lot more sets now so it's not as lucrative.

At the end of last year I bought a load of sets that were shortly going to be discounted in the hopes of making money in the future. Some of the sets I'm expecting to do well are the Silent Mary Pirates of the Caribbean set as this was the only set released when the latest film came out. Also I'm predicting the Old Fishing Store set should do well as it's a much loved set and it was only on sale for a year. Generally the higher priced licensed sets have netted you a nice return in the past.

The problem with buy sets if you have to have somewhere to store them and be prepared to keep them for a long time, even slight damage to a box can harm its resell value. Plus my wife doesn't like having lots of boxes lying round the house. I'm mainly concentrate on collecting minifigures now as their easier to store and take up a lot less room.

pattle | 5 years ago

There was a time that beanie babies, baseball cards and comic books would have yielded similar returns or better. The collectible market can get insanely hot and then die in an instant.

empath75 | 5 years ago

Why would you expect correlation? Financial assets are correlated because people tend to think of them together.

Lego is not in most people's investible universe, so there's no wealth effect or substitution effect to drive correlation.

lordnacho | 5 years ago

My brother has a few boxes of unopened baseball cards from the 1980s.

They're not worth anything.

We also have star wars cards from the 70s. To worn to be worth anything, but they brought a lot fun to young me.

If you collect things I feel you should do it because you enjoy it. Collections for collections sake always puzzled me.

Also Beanie Babies. And a bunch of other "collectables". That market crashed. Its very hard to predict.

acomjean | 5 years ago

I wonder how well that holds over time. Maybe there is a huge price increase after LEGO stops manufacturing the set, with value not increasing much over time after the point at which buyers are left to the secondary market.

Also, listing fees. Swedish eBay owned Tradera charge fees and 10% of sales value.

But, I would love to save in Lego. Keep them around and look at the boxes.

tapland | 5 years ago

Doesn't need to be Lego. Buy most popular items when discontinued, hold for a year, some people will be willing to pay more for it.

This is part of my e-commerce business. (I do some regular items as well but discontinued items are often lucrative).

See e.g. https://www.amazon.com/Motorola-H720-Bluetooth-Headset-Packa...

Two years ago this was going for $23.50 wholesale (I was offered by a large supplier) and $35 retail. Tens of thousands of units sold. Price went up over time and whoever still has units is making a killing now.

It's definitely possible to deploy millions into the business, but it's far more of an active part of a portfolio. You can't trade an index of discontinued products that appreciate.

ikeboy | 5 years ago

Made some money with LEGO technic sets something between 100% - 200%. But what was much much better was keeping some Magic Cards currently valued ~5k which I bought for pennies when at university.

_Codemonkeyism | 5 years ago

Now that I have kids I've been looking up all my favourite childhood toys. Some of them are worth a crazy amount now. But that's maybe 5% of them. So what do I do? Hoard everything?

Waterluvian | 5 years ago

There is a several dozen location retail chain called bricks and minifigs (https://bricksandminifigs.com/) that supports this trade.

It drives me crazy to spend $15 for a Jedi Master Plo Koon minifig but when my kid has been saying for weeks that is what he wants, i shell it out, and I see tons of other parents doing the same at our store.

topkai22 | 5 years ago

"Lego collecting delivers huge and uncorrelated market returns" - up to 2015, when articles like this started coming out and more people started buying ans storing sets as investments.

If you invest now you will have more competitors with the same idea so supply/demand factors are likely to be less favourable when you try to re-sell the items later.

dspillett | 5 years ago

You should see the return of investment in reserve list Magic the Gathering cards... I wish I had bought some 15-20 years ago.

gpderetta | 5 years ago

And yet there are places online where you can buy cheap legos by the pound (or kilo).

So I guess the real value is in keeping the sets together? I suppose you could make some money buying legos by the pound and then sorting them into sets and reselling them. In fact I’m pretty sure I’ve seen people who do that.

jedberg | 5 years ago

I love Lego, my kids love Lego, they have all my old Lego and it really bums me out how quickly Lego sets go out of production. One of my sons really wants a set from the first Jurassic World movie, but it's been discontinued and is only available for several hundred pounds on eBay (or 100-200 if you settle for parting it out on Bricklink) and so he's not going to ever get it.

I get that they can't keep making the sets forever, it wouldn't scale, but it's still annoying and drives this feeling of needing to buy any Lego set you might ever want, because you'll never get it later without wasting loads of money on scalpers/hoarders.

cmsj | 5 years ago

Lego bricks are an example of a product that has the market advantages of popular with both children and adults (as parents, nostalgia) that is also a durable good[1]. Purchasing new bricks today is a lot easier to justify with the knowledge that can be used with the bricks purchased 20 years ago thanks to their durability and backwards compatibility. While planned obsolescence can be profitable, durability reduces sales friction.

[1] https://en.wikipedia.org/wiki/Durable_good

pdkl95 | 5 years ago

I dislike how this article goes out of its way to prejudice the reader against a perfectly reasonable criticism but making it sound like critics are simply unwilling to entertain unconventional ideas.

mistercow | 5 years ago

LEGO collecting doesn't always work out.

I snatched up all the classic Bill Cosby Lego's I could find in 2013, thinking I could get ahead of a trend when they announced a new Lego version of The Cosby Show that was supposed to come out in 2014.

That show never came out, and Cosby's popularity isn't exactly what is was. I'm still keeping my fingers crossed for some sort of morbid Lego fan interest but so far it hasn't materialized.

My tech friends bough Crypto in 2013. I bought Cosby. Lesson learned.

ghostbrainalpha | 5 years ago

I might be just cheap but the last time I was at a toy store shopping for a Christmas gift for my friend's son, I was shocked at the retail price of Lego. I wonder how the numbers would look if we were to consider the year after year increased prices of new product, sort of an accounting for inflation. I do find it very interesting how the Simpsons kits have lost value though, is it because the bricks are somehow different than the rest?

sigmaprimus | 5 years ago

A classic essay on collectibles is relevant to several comments here: https://theonlinephotographer.typepad.com/the_online_photogr...

wmf | 5 years ago
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| 5 years ago

paying for storage of large amounts of lego sets will offset any gain you can extract out of them... obvious flaw of the study.

ekianjo | 5 years ago

I believe Pokemon cards, other trading cards and sneakers are all valuable collectible markets as well

forkLding | 5 years ago

Lack of interest in my Erector Set's going to average out those huge returns.

howard941 | 5 years ago
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| 5 years ago

they could have said the same thing about baseball cards 30 years ago

jerkstate | 5 years ago

When I was a kid I swapped a friend one Lego spaceship for his entire collection of original star wars figures that he didn't want.

If they were still carded their current value would be astronomical.

dwd | 5 years ago

Sounds ripe for a speculation bubble.

tbabb | 5 years ago

Stamps.

randomsearch | 5 years ago

well, not anymore

gammateam | 5 years ago

this and the hoarding article on here today... yeah..

joeldg | 5 years ago