The Lego As Investment Update

Lego 722.  Probably not a number you recognize, but to me, it's my first childhood Lego set. Of course, we grow and things change.  We grow up. We move, we mature. Then we go back and get all the stuff that reminds us of our childhoods! 

Good morning, Investors and AFOLs (Adult Fans of Lego)!  So back in December we reported on a study done by the Higher School of Economics in Russia that suggested Lego as an investment. Why? Well, according to the study, we are used to thinking that people buy such items as jewelry, antiques or artworks as an investment. However, there are other options, such as collectible toys. Tens of thousands of deals are made on the secondary LEGO market. Even taking into account the small prices of most sets, this is a huge market that is not well-known by traditional investors.

It is not a well-known market to traditional investors, but certainly is a well-known market to fans. How can LEGO sets make for such smarts investments, you ask? Well, according to the economists, several variables come into play. First, LEGO sets often get produced in limited quantities - especially collectible LEGO sets that tie into pop cultural events. Second, the number of them available to purchase from a secondary seller remains low. The study shares, "many owners don't see value in them (and lose or toss parts)." (The horror!) Alternatively, others do value them… and thus don't want to part with them. (This we understand.)

Well, with this article, we bought a Lego set, #10281 Bonsai Tree. According to brickeconomy.com, that particular investment has not gone too well.  At retail, we bought the set for $49.99. As of the writing of this article, most sites have it listed as $40 or more. Now that's a crucial thing: this set is still available via retail outlets. Like the 10280 Flower Bouquet which is also in our office, you can go to your local store and pick one up. By the way, the 10280 Flower Bouquet is also slightly losing ground, having dropped 6% as of this writing. So, why buy these sets? If you are building a Lego City or display and need pieces, this may be a good alternative at some point than ordering direct from Lego. Price per piece, or PPP, is around .08, which is on the low end of what Lego is offering in retail settings. The expected annual growth on a sealed set like this is around 6-7%, thanks to something called Retirement Pop. No, it's not a soft drink; it's when a set dies and the design is retired. During the first few months of retirement, some sets have seen a 20-30% "pop" due to FOMO.

So, what does this all mean? Well, for this article, I picked up the Lego Creator Expert Apollo 11 Lunar Lander, 1087 pieces, a bargain at $99 (PPP .09). I say a bargain because some sets currently available run at .10-.12  PPP. This is a special set commemorating the first Moon landing, and even if you're not a Lego fan, I would suggest picking it up.

NOW… all that to say there are two key words in the title of this set: CREATOR and EXPERT. Lets take a look at a soon-to-be-retired set, the 10291 Assembly Square currently retail of $250, also a CREATOR EXPERT that is slated to retire soon. This set has already seen sales on primary and secondary markets of $400 or more. The Creator Expert sets are historically some of the most desirable most investable sets with some returning up to 300% or more. The 10197 Fire Brigade cost $149 when new, now sells for $691, a 360% ROI. 

So, if you have room, put back some LEGO sets for a year or two; the return might surprise you! In case you were wondering, my collection top 20 retails at $2500, and my return is 30% @ $3300. It is worth noting that some of my sets are up 200% or more. 

P.S. I just bought my Lego 722 back... for only $30!