Investment Equity - Gearing

[ericholm]

Hi, I am interested in understanding what percentage of your overall investment portfolio is in Lego. From all my investments stocks & shares, bonds, lego, ISA, savings, etc. I have around 40% of my overall investment funds tied up in Lego. On reflection I think this is too much, but won't say that if the returns are good! BTW - I am not including my pension in this. Thanks all for sharing.

[stephen_rockefeller]

Speaking for myself only, I don't dabble in the stock market or anything like that.....just LEGOS. My guess is that most members here like myself, have full time jobs and invest in LEGO in there very limited spare time. My life has been pretty busy lately with all this LEGO knowledge I have been trying to cram into my head. I also work 45 hours a week and just completed my masters degree plus a family. Maybe when down the road I will be interested in the stock market but now I'm too busy......sorry I am rambling. Good luck in All your ventures!

[Ed Mack]

I have made and lost a ton of money in stocks and real estate and still invest in them to a small degree, but LEGO sets have been my focus for the last 5 years or so. At least I feel like I have control of my investments and money.

[bnb123]

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[Ed Mack]

Ed, may I ask when you started buying the first of your 2800+ sets? And have you ever sold off a significant portion of it to free up some cash flow?

About 5 years ago and I have never sold one set, which by the way, might not be the best way to maximize profits. As Mos Eisley stated in another thread, the best time to sell a LEGO set is 2 to 4 years after EOL. I have made, on paper, a substantial amount of money, but there are some sets that have peaked and have leveled off and probably should be sold.

That being said, I just don't have the time to sell sets. I own a business and work 60 hours a week and my three year old son takes up the rest of my time. Selling LEGO sets correctly takes time and effort. Maybe one day, when I'm an old fart, I'll get around to it. ;-)

[Huskers1236]

Easily less than 10% of my total investments, but I have been putting money away since I was 15(20 years ago, you do the math, I don't like to admit my age, still feeling young:), and only started "investing" in Lego for a few months, before that I was tinkering with them with my son, hoping to sell them back for the same amount of money, essentially a free hobby. But after seeing this site, the light clicked on, "I can have fun with Lego, and MAKE money"!! Of course, my wife does not see eye to eye with me on this, but that is why we have our own money in special savings accounts, outside of our joint accounts, for whatever we feel like, and the other has no say in the matter. I am currently looking to sell off some used sets to free up some more cash, I would like to have a few thousand free for days like the Walmart sales to catch all the good deals, but that could be a pipe dream until the sets I have are ready to be turned over, which as some have pointed out, could be several years. All investments have risks, even Lego. The track record for this hobby is excellent however. But like others have said, a lot of people are catching on, which could possibly saturate the market with MISB copies of sets 5 years down the road when in years past they would have been much rarer, and thus, more expensive. I think prices will be realized on these big sets, but will take more time to get the supply/demand where you need it to get your price.

[Amberyl]

I've been considering the dynamics of the market in relationship to the quality of Lego products over the last decade and a half or so. I've been through a two dark ages -- maybe three, depending how you count. I stopped collecting Lego when I went to college (though I still got a set every Christmas through college), then for about three years when I was fresh out of college. Then I found pirate ships at massive discount at KB Toys, which got me building again. That was shortly followed by the release of Star Wars Lego, but when I had bought and built everything in the run, Lego was not releasing quality sets quickly enough, and so I stopped again. Eight years passed, and in 2008, I got sucked in sufficiently to buy two really great sets, but the other sets didn't seem attractive enough to be worth getting. Set quality has improved steadily since then, and the 2012 releases have been superb. I've begun selectively picking up sets that I missed that I'd like to have, but they are without exception sets released in 2008 and later -- the designs before then aren't at the same level of quality, for the most part. But with Lego releasing more and more things that appeal to AFOLs, many people won't actually going into dark ages in the same way -- and when they come out of their dark ages, there will be plenty of new, high-quality sets to satisfy the building appetite. The need to dip into older sets to feed the beast will be less. The current horizon for Lego investment, especially for large sets, is at least partially attributable to people who stopped buying Lego when it started to be stupidly juniorized, and are only now realizing how much good stuff is being put out -- catching up on good stuff released in the last 2 to 4 years. Will that still be true in the future, as the pipeline fills with good sets and Lego extends the production runs of especially successful AFOL-targeted sets? (Note: I am not a reseller, purely a collector. But the business side interests me from a curiosity standpoint.)

[Ed Mack]

I've been considering the dynamics of the market in relationship to the quality of Lego products over the last decade and a half or so.

I've been through a two dark ages -- maybe three, depending how you count. I stopped collecting Lego when I went to college (though I still got a set every Christmas through college), then for about three years when I was fresh out of college. Then I found pirate ships at massive discount at KB Toys, which got me building again. That was shortly followed by the release of Star Wars Lego, but when I had bought and built everything in the run, Lego was not releasing quality sets quickly enough, and so I stopped again. Eight years passed, and in 2008, I got sucked in sufficiently to buy two really great sets, but the other sets didn't seem attractive enough to be worth getting. Set quality has improved steadily since then, and the 2012 releases have been superb.

I've begun selectively picking up sets that I missed that I'd like to have, but they are without exception sets released in 2008 and later -- the designs before then aren't at the same level of quality, for the most part. But with Lego releasing more and more things that appeal to AFOLs, many people won't actually going into dark ages in the same way -- and when they come out of their dark ages, there will be plenty of new, high-quality sets to satisfy the building appetite. The need to dip into older sets to feed the beast will be less.

The current horizon for Lego investment, especially for large sets, is at least partially attributable to people who stopped buying Lego when it started to be stupidly juniorized, and are only now realizing how much good stuff is being put out -- catching up on good stuff released in the last 2 to 4 years.

Will that still be true in the future, as the pipeline fills with good sets and Lego extends the production runs of especially successful AFOL-targeted sets?

(Note: I am not a reseller, purely a collector. But the business side interests me from a curiosity standpoint.)

The driving force of LEGO investment is children. That's right...kids. And they will be the main reason why LEGO investing remains strong in the future(unless LEGO changes its basic business model and overproduces sets and/or produces inferior quality products). The kids of today will be the investors of tomorrow with discretionary money to spend. That 10188 Death Star they couldn't afford as a ten year old will be obtainable as a 30 year old with a job and extra money. It is a cycle that has developed and is growing stronger by the day.

[legoman666]

I've been dabbling in stock options recently which has me almost 3k in the red . My LEGO collection, which was once about 33% of my total investments (not including my 401k), is now about 50%. I only invest money I can afford to lose (but would prefer not to, obviously.) However, if my stashed MISB sets become worthless, I can at least build them. My stock on the other hand, are just numbers in an account.

[Amberyl]

The driving force of LEGO investment is children. That's right...kids. And they will be the main reason why LEGO investing remains strong in the future(unless LEGO changes its basic business model and overproduces sets and/or produces inferior quality products). The kids of today will be the investors of tomorrow with discretionary money to spend. That 10188 Death Star they couldn't afford as a ten year old will be obtainable as a 30 year old with a job and extra money. It is a cycle that has developed and is growing stronger by the day.

So let me respectfully challenge that assertion a little.

For an iconic set but repeatable set like the Death Star, there is a significant chance that 20 years from now, Lego will have done multiple versions of it -- just like they have periodically refreshed the X-Wing and TIE Fighter. Will that hypothetical adult covet the set from their childhood, or the current generation of the same model?

Some sets might be iconic and distinctive and not repeated. Let's look at 1992's 6086-1 Black Knight's Castle for an example of a set from 1992 that fits this description. Brickpicker's data shows a value of about $400 new currently, off an $85 RRP, representing a 8% CAGR over the 20-year period. So you've got to warehouse that set new-in-box for 20 years to make what will basically be a $300 profit. I can't find the dimensions of that set online anywhere, but compared to other sets, about 0.75 cubic feet seems reasonable, and rounding up to 1 cubic foot (to account for space between shelves etc.) seems more than conservative in terms of space occupied. So on 6-foot shelves in a 10x10 room, you can store 600 sets of that size -- basically $180,000 of profit in a 20-year period.

And you're also betting on the fact that 20 years from now, 3D printing technology doesn't make it easy for someone, perhaps even Lego themselves, to offer individually-printed reissues of old sets.

Near-term buy-and-flip on highly sought-after sets, making a quick buck, seems to make a lot more sense.

[Doofy McGee]

I am fairly young, in college (again), and for the most part fairly poor. I don't have much in the way of investments because I am still playing catchup on the student loans, but right now almost all of my investment money is tied up in LEGOs. I know that NO investment is fail proof, but I feel pretty good putting it into LEGOs. They just have too good of a track record to ignore. I know that my sets will not all appreciate, but some will, and I am fairly confident that I will at least get all my money back. It can be looked at as a fun kind of savings account, if nothing else. :)

[TheOrcKing]

And you're also betting on the fact that 20 years from now, 3D printing technology doesn't make it easy for someone, perhaps even Lego themselves, to offer individually-printed reissues of old sets.

I really do wonder just how well developed 3D printing will ever be. It seems like a novel idea, but it will be a LONG time before it becomes practical. That's assuming if it isn't just replaced by something that makes the 3d printing idea obsolete.

Ugh, the main reason why technology is freakin' annoying! Spend a ton of money on 'the next thing' only to have that replaced by 'the next NEXT thing' barely a couple years later it seems.

Anyway, I agree on the 'quick-flip' idea. I mean, who can wait twenty or thirty years for a set to maybe increase in value like the "Castle" (6075) from 1981? It's one thing to have some sets that are intended to 'sit on the sidelines', but in the meantime, make some profits here & there from everything else. They may not be the 'great sales' we would like to make, but it all does add up.

[Ed Mack]

So let me respectfully challenge that assertion a little.

For an iconic set but repeatable set like the Death Star, there is a significant chance that 20 years from now, Lego will have done multiple versions of it -- just like they have periodically refreshed the X-Wing and TIE Fighter. Will that hypothetical adult covet the set from their childhood, or the current generation of the same model?

Some sets might be iconic and distinctive and not repeated. Let's look at 1992's 6086-1 Black Knight's Castle for an example of a set from 1992 that fits this description. Brickpicker's data shows a value of about $400 new currently, off an $85 RRP, representing a 8% CAGR over the 20-year period. So you've got to warehouse that set new-in-box for 20 years to make what will basically be a $300 profit. I can't find the dimensions of that set online anywhere, but compared to other sets, about 0.75 cubic feet seems reasonable, and rounding up to 1 cubic foot (to account for space between shelves etc.) seems more than conservative in terms of space occupied. So on 6-foot shelves in a 10x10 room, you can store 600 sets of that size -- basically $180,000 of profit in a 20-year period.

And you're also betting on the fact that 20 years from now, 3D printing technology doesn't make it easy for someone, perhaps even Lego themselves, to offer individually-printed reissues of old sets.

Near-term buy-and-flip on highly sought-after sets, making a quick buck, seems to make a lot more sense.

I believe you are misunderstanding my main point. I was addressing your question about the future of LEGO investing and why I believe it will remain strong. Child LEGO fans turn into adult LEGO fans and they have children and pass on their interest in LEGO bricks to their kids and so on and so forth. There will always be new fans that want older sets that they were unable to or unaware of years earlier. Whether its 4-5 years later or 10-15 years later, there will be a new generation of buyers that will pay big prices for retired sets that intrigued them years earlier.

I agree 1000% with your assertion about the best time frame to cash in on investment on most sets is 2 to 4 years after EOL. Waiting 10 or 15 years is not an option for many. I was just using the 10188 as an example of an expensive set today that a lot of kids can't afford, but will be able to afford in the future. There are hundreds, if not thousands of different ways to make money investing in LEGO sets and I'm a proponent of all of them.

As for the 10188 Death Star and multiple versions coming out at a later time, well, let me say that the STAR WARS theme has less than 10 years to go on its license. I really don't believe it will be renewed after that unless there is a new STAR WARS movie during that time period. Do you really think LEGO will offer a new Death Star after two classic sets like the 10188 and 10143? LEGO doesn't usually redo large sets like these two, but anything is possible. But I would bet against it. Thanks for the quality response.