Throwing Money Away: Why Not Buy Everything?

[Guest]

Anyway, this is a good read. Thanks for taking the time. Newbie lessons to be had from OP: not all Lego is a winner based on MSRP, so don't just buy everything you see. Lesson from comments: you can still make money on most sets if you get large enough discounts. 50-60% off or more since even the worst sets (based on MSRP growth) will only drop a few % points below MSRP.

[Rimmit]

As a general rule of thumb in not just Lego Investing, but in collecting in general, in terms of what will appreciate in value, is that if it displays well,  it will do well.

In my 34 years of collecting that is ultimately what I have learned.  As a child, I collected anything and everything of any theme.  I was a huge trekkie in the 1990's and that was a total disaster, however, the only items that retained some value, and even potentially appreciated were the ships.  Why did the ships appreciate, and not the endless amounts of action figures. Because it is DISPLAYABLE. 

People want to pay money for things they can display.  Many people buy things to have a complete collection, but ultimately, the items that ALWAYS sell for the most are the ones that are the most displayable.  My gobs of action figures Mint On Card don't matter because you can't put them up in an office and have them be acceptable from a display standpoint without looking bad or cheesy.  Some of the nicer action figures these days do pretty well, but again, it must be displayable, not look cheap, and typically the more articulation points the better.  But again IT IS DISPLAYABLE. 

I always use the CEO Rule.  If you can imagine this in a CEO's office on a shelf or in a glass display case, then it will likely do well.  If you can't it is not as good of a bet.  The Lego playsets almost ALWAYS do worse than the vehicles and ships simply because most adults, who are the people can afford to pay 1,000's for a set, do not want to display Arkham Asylum or a Hoth Attack playset in their office.  The Modulars do well because they are a series, and many people want to have a whole town, and to have a complete town, they have to buy the first ones, which no one stock piled at the time. As time goes on, people jump on in the middle and then need to buy the subsequent versions.

Even a weak IP (intellectual property) or total lack of IP (Think Taj Mahal, Eiffel Tower) will do well if it can be displayed.  While a strong IP like LOTR and Harry Potter are not a bad thing,  There were very few truly ICONIC sets made from those IP's.  If there was a UCS Hogwarts, that would have had major potential, but sadly none was ever made.  And while there is the ToO, it has not done well in retirement, again, because it is not something I would put in a CEO's office. It has a Goth feel to it, and a business Exec does not want to convey a "Goth" feel.  However, Star Wars has a more "intellectual" feel about the property, and most of the vehicles are instantly more recognizable than the ToO.

Lastly, an appreciating collectible CANNOT BE A FAD.  No matter how displayable something is, if it is a FAD then EVERYONE and their mother will buy one.  (Think Beanie Babies, Furbies, etc.)  With a Fad eventually the market will shrink as the Fad dies.  As with anything, pricing is based on supply and demand. When a fad dies, the supply is massive, and the demand miniscule causing the implosion in prices.  Why is my Star Trek Collection worthless, cuz it was a fad.  Why are my beanie babies worthless?  Cuz it was a fad.  While Franklin mint items are beautiful to display, they were again Fads, and people bought them in droves as they believed they would be worth something some day.

Legos are NOT a fad.  Even though Legovesting is more popular now, it is still not a FAD.  There are not groves of people lining up outside stores so they can invest in Legos.  People do not call every store in the area so they can buy legos.  Not only are Lego's not a fad, but the number of Lego fans grow worldwide EVERY YEAR.  Lego's are universal and loved in every country. 

Legos are displayable AND socially acceptable to have in your office.  I have many toys and Lego's in my office and most people find them amusing and entertaining. The toys I keep in my office that are not legos are typically very well made Sci-Fi ships with nice display value such as the Art Asylum Star Trek Series, Bandai Star Trek Model Series, and Battlestar Galactica Moebius ships.  The business executive professional market increases the market value tremendously, and is what allows the toys to sell for hundreds and thousands. Children are NOT likely to spend 2000 on a MF or Taj Mahal.  Adults with expendable income will though.  This is why the bigger the set, the more people are willing to spend for it.  Most people willing to spend 3000 on a Taj Mahal do not want Minifig clone armies displayed in their office or their house.  The professional DEFINITELY DOES NOT want Chima, Lone Ranger, Nexo Knights, Friends, or Prince of Persia in their office either.  They wouldn't mind a UCS Imperial Shuttle or UCS Slave I though.  While some of the sets might return a nice CAGR such as Friends, they will never hit the astronomical heights of the UCS Sets, simply because children do not have the cash to pay 1000 for a friends set.

Lego's are like the Apple of the toy world, and as such are able to command higher prices than the average toy.

 

 

 

[tjj1984]

Was there ever anyone--anywhere--advocating buying *every* LEGO set? I think you're arguing a straw man.

[thoroakenfelder]

1 minute ago, tjj1984 said:

Was there ever anyone--anywhere--advocating buying *every* LEGO set? I think you're arguing a straw man.

Was there ever anyone anywhere who jumped into buying stuff to make money without doing research and just buying whatever was to hand? I'm looking at you pogs, baseball cards, beanie babies, comic books, etc. etc. etc.

[Darth_Raichu]

16 minutes ago, Rimmit said:

People want to pay money for things they can display.  Many people buy things to have a complete collection, but ultimately, the items that ALWAYS sell for the most are the ones that are the most displayable.  My gobs of action figures Mint On Card don't matter because you can't put them up in an office and have them be acceptable from a display standpoint without looking bad or cheesy.  Some of the nicer action figures these days do pretty well, but again, it must be displayable, not look cheap, and typically the more articulation points the better.  But again IT IS DISPLAYABLE. 

I always use the CEO Rule.  If you can imagine this in a CEO's office on a shelf or in a glass display case, then it will likely do well.  If you can't it is not as good of a bet.  The Lego playsets almost ALWAYS do worse than the vehicles and ships simply because most adults, who are the people can afford to pay 1,000's for a set, do not want to display Arkham Asylum or a Hoth Attack playset in their office.  The Modulars do well because they are a series, and many people want to have a whole town, and to have a complete town, they have to buy the first ones, which no one stock piled at the time. As time goes on, people jump on in the middle and then need to buy the subsequent versions.

Just out of curiosity, do you think this set is displayable?

 

[tjj1984]

3 minutes ago, thoroakenfelder said:

Was there ever anyone anywhere who jumped into buying stuff to make money without doing research and just buying whatever was to hand? I'm looking at you pogs, baseball cards, beanie babies, comic books, etc. etc. etc.

Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

[legogregors]

12 minutes ago, Darth_Raichu said:

Just out of curiosity, do you think this set is displayable?

 

Maybe for a Vice President's office

[Sfcommando14]

Don't listen to the haters. I started this recently without reading articles. I was buying Lego sets for my daughter (and myself) and saw they were never on sale and older ones were more expensive used now than they were new (HP and SW was what I was tracking). I then saw the JW selling over RRP and grabbed some on the shelves and sold on eBay and made some money over the holidays. As a newbie in a moderately affluent area, there were never discounts. So I made rookie mistakes and have a few hundred dollars sunk into sets bought at >25% off that will still take time to make any money (if they haven't all been given away as presents by then). This is a great article for people starting out. Sure, people made money on dud product lines, but most people would be lucky to break even.

[Guest]

Haters?

[Deadfraggle]

1 hour ago, tjj1984 said:

Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

I don't know if the sole purpose of this website is for investment research. I like to think of it as a community of LEGO fans, collectors, and pure investors. Some people obviously fall into multiple categories. I can think of any number of reasons I love this site, beyond doing investing research.

I don't think it's a straw man argument because there has been a fair amount of recent, relevant media attention suggesting that LEGO investing is a sure fire way to achieve great returns. This article is simply a counterpoint to that sentiment. For the seasoned, savvy reseller, this article might seem like obvious points, but for a noobie, maybe not so much.

 

[thoroakenfelder]

8 minutes ago, tjj1984 said:

Right, but the sole purpose of this website is to serve as a resource for LEGO investment research. If this article is not arguing a straw man, it's certainly preaching to the choir.

Obviously you haven't noticed the spate of posts recently of "I just saw that I can make money on LEGO tell me what to buy." "I want to make money on LEGO, I just bought everything on clearance I could find." "Is it a good idea to buy these Chima that I saw for $1 off? I just started buying LEGO for profit."

[phat64]

There isn't anyone here that bought GS at MSRP I hope.  LR were mostly heavily discounted near the 30-40% range pre-tax/bonus points/rewards.  So if you got say LR for 40-50% off MSRP, if you sell it for MSRP you can still double your investment.  THis is nothing new here I'm sure.  Cost basis x resale value = profit and all.

[Phil B]

25 minutes ago, phat64 said:

There isn't anyone here that bought GS at MSRP I hope.  LR were mostly heavily discounted near the 30-40% range pre-tax/bonus points/rewards.  So if you got say LR for 40-50% off MSRP, if you sell it for MSRP you can still double your investment.  THis is nothing new here I'm sure.  Cost basis x resale value = profit and all.

The problem with your statement is: who are you selling this to for MSRP? 

[justapilgrim]

I'm sitting on 75% off GS that when it hits 25% off MSRP I still won't break 100% return after shipping and fees. Things like this helped me leave stacks of 40% off creator and friends sets the last month or two

[phat64]

4 hours ago, Phil B said:

The problem with your statement is: who are you selling this to for MSRP? 

You completely missed my point, which was that you buy sets based on your cost basis times what you think is your future resale value.  So there can be money to be made on terrible lines. Some people were easily able to buy GS/LR sets at 50-75% off.  They clearanced these sets heavily.  So, @ resale 50-75% of MSRP you still can double your money. 

Reading comprehension bro.

[Phil B]

6 hours ago, phat64 said:

You completely missed my point, which was that you buy sets based on your cost basis times what you think is your future resale value.  So there can be money to be made on terrible lines. Some people were easily able to buy GS/LR sets at 50-75% off.  They clearanced these sets heavily.  So, @ resale 50-75% of MSRP you still can double your money. 

Reading comprehension bro.

I'm still not there ... explain yourself further (and without the pejorative undertone please). What I understand from your statements is:

- You buy at 50-75% off.

Then either (your second post):

- You sell (quote "@ resale 50 - 75% of MSRP") for the same amount and double your money? Makes no sense to me.

or from your first post:

- (quote " if you sell it for MSRP you can still double your investment") you sell it for MSRP. This makes sense, but that's where I posed my (semi-rhetorical question): Who is going to buy this at MSRP, if every retailer had to discount the line to 50-75% of MSRP before it got bought? You need someone who is willing to pay this, and with most of the lines mentioned, those buyers are far and between. So the more realistic scenario is that you sell at 20-25% under MSRP, and then take into account fees and shipping you don't make much money.

Of course there are people who do their homework on market research, know where, when and how to sell these sets at MSRP and make good money that way, but in the spirit of the article, this is not something a newcomer to investing and selling will automatically do right.

[heyitsme]

i am all $25,000 in on scooby doo. Its scooby doo or bust

[AirborneAFOL]

17 hours ago, Rimmit said:

Legos are NOT a fad.  Even though Legovesting is more popular now, it is still not a FAD.  There are not groves of people lining up outside stores so they can invest in Legos.  People do not call every store in the area so they can buy legos.  Not only are Lego's not a fad, but the number of Lego fans grow worldwide EVERY YEAR.  Lego's are universal and loved in every country. 

I've given this point a fair bit of consideration the past couple years.  While I certainly agree with your overall points (particularly the instrinsic value of collectibles being their display value, and Lego's enduring popularity), I do think there are some risks to "Lego investing" that I fear many of us don't fully appreciate.

If you take the longview, and a true investment mindset, it's indisputable that we're in a bull market.  The 2000's were a horrible decade, when Lego's product was so shody and popularity in a "recession" - the amount of money trading hands on the secondary market was a fraction of what we are seeing now.  The Lego Movie was a massive succuess and kind of rang the bell to set the bulls running - Lego rose to the top of kid's Christmas Lists once again.  Combine that with The Lego Group putting and end to the missteps of the 2000's, and you have two major forces at play.  Add in Disney's purchase of the StarWars and a trio of films, and suddenly we're finding ourselves in the midst of a Lego boom.

But as an investor, that screams to me that the market is in record territory, and potentially at a peak.  Can it go much higher?  It's tough to imagine demand growing much higher, and we're already seeing signs of a peak in terms of high ROI sets becoming tougher to come by as bargains get snatched up ever faster and ever-growing resellers drive down the market rates on selling. The mere fact it's getting tougher, not easier, to attain high yeilds is a red flag of the market being near its peak.

All in all, Lego will certainly endure.  But what seems clear is the market is trending *away* from an "easy money investment".  Which really just means people diving into "better than gold" media hype Lego investing right now are likely poised for a sizable amouny of dissappointment - only the vest astute, committed (dare I say "fanatical") investors are currently making a sound ROI.  And that isn't likely to change anytime soon.

[guiriman]

22 hours ago, Rimmit said:

Lego's are like the Apple of the toy world, and as such are able to command higher prices than the average toy.

Have to confess that I was wondering who was paying the super-high prices for UCS and the like, so this gives me some insight.

[waddamon]

My two cents are that there are no sure things.  Sound bets, yes, sure things no.  UCS B wing being an recent example, measured from retail which is the consistent price point for those kinds of sets.  I am slowing down considerably and choosing much more wisely.  I passed on a good 30 sets yesterday.  I would have bought two years ago.  Not anymore.  People better be wise or the money will burn.  My ROI has been quite good too, after all fees averaging 90% plus.

[mlc3423]

7 minutes ago, waddamon said:

My two cents are that there are no sure things.  Sound bets, yes, sure things no.  UCS B wing being an recent example, measured from retail which is the consistent price point for those kinds of sets.  I am slowing down considerably and choosing much more wisely.  I passed on a good 30 sets yesterday.  I would have bought two years ago.  Not anymore.  People better be wise or the money will burn.  My ROI has been quite good too, after all fees averaging 90% plus.

I'm fairly new to the Lego game but have sold on ebay for years various things from baseball cards to lp records to antiques and like a lot of people bought legos on clearance and moved them for a decent profit...I've just now started to invest in legos full time and i realize from my brief purchases and extensive research reading hundred of articles and posts on this site that the exclusives seem more solid than buying random legos at your local retail MSRP or even at a discount...

I look at Legos like i do investing in the stock market.....I love finding great deals on sale and clearance as well as getting stocks on the low end like everyone else but i also believe you should pick and choose wisely......And getting advice from people is great as well (No charges on here unlike previous stockbrokers of mine...LOL) but at the end of the day i think everyone has to do what is best for them regardless if you're buying Legos, Stocks, or the next sure thing to come along (I know many who have dropped thousands into POP Funko...All i'm saying)

Bottom line is to have fun and be smart and don't go bankrupt or maxing out credit cards....Only spend what you can afford and realize not everything is a winner!

[varmintt]

On 2/12/2016 at 0:39 PM, Rimmit said:

 

I always use the CEO Rule.  If you can imagine this in a CEO's office on a shelf or in a glass display case, then it will likely do well.  If you can't it is not as good of a bet.  The Lego playsets almost ALWAYS do worse than the vehicles and ships simply because most adults, who are the people can afford to pay 1,000's for a set, do not want to display Arkham Asylum or a Hoth Attack playset in their office.  The Modulars do well because they are a series, and many people want to have a whole town, and to have a complete town, they have to buy the first ones, which no one stock piled at the time. As time goes on, people jump on in the middle and then need to buy the subsequent versions.

 

You just put into words exactly what I've been coming to realize but unable to verbalize so succinctly.  Lot of wisdom in that paragraph right there.  Newbies should take notes.  If I had understood this concept when I got started I'd be sitting on a pile of black pearls that were selling for 80 bucks a piece during Target.com's Black Friday sale that I passed on (still kicking myself).  I did however load up on x-wing 9493 that year which have done very well, again supporting your point.

[tjj1984]

On 2/12/2016 at 5:20 PM, Deadfraggle said:

I don't know if the sole purpose of this website is for investment research. I like to think of it as a community of LEGO fans, collectors, and pure investors. Some people obviously fall into multiple categories. I can think of any number of reasons I love this site, beyond doing investing research.

I don't think it's a straw man argument because there has been a fair amount of recent, relevant media attention suggesting that LEGO investing is a sure fire way to achieve great returns. This article is simply a counterpoint to that sentiment. For the seasoned, savvy reseller, this article might seem like obvious points, but for a noobie, maybe not so much.

 

I'm new around here, so I'll concede the fact that I may have misinterpreted the intent of the website, but the tagline is "LEGO PRICE AND INVESTMENT GUIDE."

I thought the article was well written, but I still don't think it was a point that needed to be made to this audience.

[redcell]

On 2/13/2016 at 8:04 PM, Phil B said:

The problem with your statement is: who are you selling this to for MSRP? 

Do you mean that you doubt that LR sets can be sold for MSRP at the moment? 

[thoroakenfelder]

1 hour ago, tjj1984 said:

I'm new around here, so I'll concede the fact that I may have misinterpreted the intent of the website, but the tagline is "LEGO PRICE AND INVESTMENT GUIDE."

I thought the article was well written, but I still don't think it was a point that needed to be made to this audience.

I'd concede, and most of the discussion backs up the point, that most of the audience of the website doesn't need to have this point made. However, a certain percentage of the users, ones who signed up recently, are not doing the research and are asking to be spoon fed how to do this do need it. There's a certain population that needs to be faced with the hard reality that they need to be discerning and do the research.