Home Finance LEGO: Savvy Investment or Financial Black Hole?

LEGO: Savvy Investment or Financial Black Hole?

Collecting LEGO has been in the news lately as a better investment than gold. Despite the gloss that the media has put on the ‘investment’, the reality of the matter is that like any other true investment, education is the key to success.

We’re here to shed some light on the accuracy of this assertion, and where to begin.

For starters, potential investors need to come to grips one fact. It is EXTREMELY unlikely that they will make any money. Let alone make it quickly from a straight-up flip.

The massive appreciation enjoyed by sets such as the Ultimate Collector Series (UCS) line and the sets of old were largely because back in those days, LEGO Collecting (or more accurately, LEGO Hoarding) was still considered a niche and obscure hobby.

These sets were not particularly rare or produced in such low quantities that demand was not met. In fact, the set that is considered by many to be the Holy Grail of LEGO; the 10179 UCS Millennium Falcon, was available a full year after it was officially retired at normal retail prices.

It was not uncommon to find them available in the more obscure Toys ‘R Us outlets even after that point.

Lego Investment - Lego - UCS - Millenium Falcon - 10179 - Star Wars - Disney

In fact, the only real guarantee of value (as with any other investment vehicle) is the perception and behavior of other participants in the market. The 10179 became so valuable simply because those buyers who bought while demand was readily met, either consumed their sets and assembled them. Some wouldn’t even part with the set for any ‘reasonable’ price once it became apparent they would not be able to easily reacquire this set again.

And like any other speculative market; if no reasonable price is accepted, given enough time and desperation, eventually an unreasonable price will be offered. This is exactly what happened. And suddenly, even Time is singing the praises of the ‘investment’.

The Key to Investing

So then how does one make ANY money at all off this hobby?

The first step to making this work is to actually love LEGO more than you love money.

This seems counter intuitive. However, the reality is that if you are only looking to make a quick buck off this, you will fail miserably. This is largely because the time horizon for this speculative play is essentially indefinite and plagued by uncertainties.

LEGO makes no money off the secondary market. So, it is in their best interest to keep the popular kits in production for as long as it makes money. As long as it remains relatively easy to acquire kits at retail, your kit will not appreciate beyond what can be explained away by normal currency and supply fluctuations.

Lego - Finance - Investment - Diorama - Malaysia

So to even conceivably unlock above normal returns, you would have to hold the kit for a long time. You have to wait not only until LEGO stops producing the kits, but also until all their warehouses are bare and all the skittish speculators have sold all their stuff.

Secondly, you need to educate yourself on what makes a set valuable. When you examine the hobby down to its core, you can essentially recreate any LEGO kit with a mish-mash of other kits and custom picked bricks.

What makes a set valuable? The sheer number of elements that cannot be reproduced by other sources.

Lego - Finance - Investment - Diorama - Malaysia

In the past, this was the realm of the UCS line. However, LEGO has made great strides in creating minor gimmicks for most of their sets. They are making the majority of them unique in order to boost their desirability to collectors.

Minifigures

The most obvious expression of this phenomenon are the Minifigures included in each set. In fact, Minifigure collecting is a huge sub-genre of Lego collecting. Speculators often judge the value of sets by how high their Minifigure ‘value’ is.

With a large number of kits, you may actually be better off cracking your kit and selling the Minifigures separately rather than holding it Mint In Sealed Box (MISB) for an indefinite amount of time.

Lego Investor- Investment - Mr Gold - Minifigure - Rare

Thirdly, you need to be aware of who would conceivably buy your set for an absurdly inflated price. The most obvious market for these collectibles are the fans of licensed products.

Sets tied to intellectual properties such as Star Wars, Batman, and The Avengers tend to do better on the secondary market than in-house properties due to the demand from their core fandoms.

The next most obvious market for these items are dubbed the ‘Creators’. These individuals are some of the most avid fans of LEGO. They will devote an ungodly amount of time creating entire dioramas, even entire worlds in their spare time.

Lego - Finance - Investment - Diorama - Malaysia

LEGO has even created an entire line devoted to these individuals to allow them to achieve even their greatest ambitions.

However, as with all speculative investments, the most money you will ever make is probably by selling to latecomers to the game.

That said, the kits themselves are highly attractive. If one catches your eye, it might be worth picking up. As for the potential investment value attached to kits currently on the market, check out our suggestions for what you should get hold of. – The Binge

Picture of Mr Gold from The Mini Figure Store UK. Picture of the UCD Millennium Falcon from Amazon.

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"Warlord" by day, father by night, Nicholas enjoys a career with Games Workshop which allows him to feed into his addiction for strategy games. Having won multiple X-Wing Tournaments, he strongly believes he will rule the world some day.

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