Lego over gold. Investing in dice can bring a decent return

Lego over gold. Investing in dice can bring a decent return
Lego over gold. Investing in dice can bring a decent return

Wine, vinyl records, quality hard liquor or art. If high inflation and the crisis of recent years have taught the Czech Republic anything, it is a more active approach to managing one’s own finances. In addition, the shock of the losses of popular investment funds in the post-covid era forced many of them to think about alternative ways to value money.

In the case of Lego, the isolation at the beginning of the pandemic and a somewhat forced return to childhood undoubtedly played a role. Nostalgia and emotions associated with the unmistakable blocks then turned into a new passion for collecting among some adults.

You can make money from Lego, but it’s a hobby, a lot connected to the fact that you simply enjoy the kits. It’s not for the typical financier.

A side issue

Locking families into homes has had an unprecedented impact on Danish Lego. Although the sharp increase in profits in the pandemic years 2020 (21 percent) and 2021 (27 percent) cannot be attributed only to isolation, but also to the development of e-commerce and the company’s expansion into China, the incomparably greater amount of time spent at home had the effect of reviving interest in the most famous toy undoubtedly influence in the world.

We have already written about how Lego conquered the world. The “bones explosion” was noticeable even in Czech conditions: in 2020, the Aukro marketplace recorded a year-on-year increase in the number of kits sold by 600 percent and turnover by more than a thousand percent.

“Many people returned to Lego out of nostalgia, they had nothing to do at home, so they started buying sets. And when you start to take a little more interest in it, you will soon find out that you don’t just have to build, but that in most cases it pays to buy the given set, keep it and sell it at a profit, maybe three or four years after the end of production,” says Michal Saviors from the company Savior Bricks, which deals in the sale of Lego pieces and figures.

Although according to recent research by the Czech investment platform Bondster, investments in Lego are still a marginal issue (roughly six percent of investors are dedicated to them), especially sellers and industry influencers feel a significant increase in interest in consulting.

“Several people call me every day asking for investment advice. Some of them have a ridiculous amount of money and say they need to spend ten million. In that case, I will tell them to buy gold or something else,” says Miloš Křeček, owner of one of the largest Lego collections in the Czech Republic and founder of the Lego museum network.

“You can make money from Lego, but it’s a hobby, a lot connected with the fact that you simply enjoy the kits. It’s not for typical financiers,” he explains.

Between 1987 and 2015, Lego’s returns were around 11 percent per year. But it is from extreme to extreme.

Cube economy

One of the most frequent questions that Křeček receives is, understandably, the question of evaluation and tips on specific “guaranteed profitable” sets. However, as is often the case in the field of investments, there is no 100% working advice here either, and everyone has to consider their risk tolerance for themselves.

The advantage is that data on secondary market Lego sales is readily available today. Useful guides for making decisions include specialized comparators or marketplaces such as Brick Owl or BrickLink (which even bought Lego in 2019), but the BrickEconomy website is of crucial importance for investors, which uses artificial intelligence to analyze data from various sources and model the development of a “portfolio”. to the future.

The researches that have been dealing with alternative investments in Lego in recent years draw the most from this data. Mainly a study by female authors from the Moscow Faculty of Economic Sciences (2021) made headlines, who, based on an analysis of a relatively large sample of data, claim that the income from Lego usually exceeds the income from traditional investments such as shares or bonds, as well as a number of alternative investment items.

Between 1987 and 2015, they said, Lego’s returns were around 11 percent a year; however, it must be said that this is an average, which on closer inspection will reveal considerable extremes in the valuation of different kits.

The 2018 analysis by economists Josef Novotný and Aneta Charvátová from the University of Pardubice is telling: for the ten most valuable sets of 2016, they talk about a cumulative yield in the order of hundreds to units of thousands of percent. They also compared the appreciation with investments in gold, and their verdict was quite unequivocal:

“Compared to the most valuable Lego sets, the difference is really abysmal, because the gold has appreciated in the order of tens of percent, while the sets have exceeded the threshold of a thousand percent.”

Sometime in two to three years after the end of production, the price is usually at its maximum and it is optimal to sell the investment set.

Buy, hold, sell

Such high profits when investing in Lego can of course only be achieved occasionally, but even Czech industry insiders claim that it is historically almost impossible to break even on Lego. “If you don’t buy it at an overpriced price, but stick to sales, you’ll always sell it for a little more in a few years. I would probably compare it most to gold. If you hit the right set, the appreciation can be 50 to 200 percent in five years,” says Michal Saviory.

However, the rate of appreciation is not everything. According to the already mentioned study from 2021, returns from Lego are stable and not as strongly linked to market fluctuations as, for example, shares. Dice produced consistent returns even during the financial crises of 2002 and 2008, and the current crisis does not seem to have changed that.

It is also ideal for a Lego investor to buy low and sell high. It is therefore a good idea to buy an investment set or figurines at events, with a certain time gap after the launch. Discounts can range from 50 to 70 percent of the original catalog price.

The moment that investors look forward to with the greatest tension is the end of the production of the given kit. It is a collector’s closely watched date, which is not officially announced by the manufacturer, and information about it is spread informally through various channels (for example, the Brick Fanatics website). At this moment, the set disappears from the primary market and begins to appreciate more significantly.

“Sometimes two to three years after the end of production, its price is usually at its maximum and it is optimal to sell the investment set. After that, the price rises more slowly,” says Michal Saviory. This is not universal advice: as evidenced, for example, by data from the BrickEconomy website, the dynamics of the development of the value of different figures or sets can vary considerably.

There is no exception when a set of, for example, 400 dice contains two minifigures and only those make up 70 percent of the set’s price.

The Star Wars mover

In the book Lego as an investment, investor Radek Janáč recalls that the “turning point” in investment thinking about Lego was the year 2000. At that time, the company decided to make more use of licensing film themes such as Harry Potter, Star Wars, Batman and others.

At the same time, this is the period when more detailed large construction kits with many blocks began to appear. Although this is not absolutely true, the size of the kit and its uniqueness are the usual prerequisites for its evaluation.

Licensed kits have several advantages from an investor’s point of view. “Thanks to them, new fans (buyers) come to the kits, and very often with each new part of the film (typically Star Wars, for example), these fans buy Legos on the given theme, or they also want older pieces,” reminds Janáč.

A newly released series of films thus often revives interest in older editions of the given licensed series, which tends to have a positive impact on revenue. Licensed sets also provide some insurance that our investment will not simply depreciate. This is because Lego is usually licensed for a limited period of time, and re-releases due to the need to renew licensing rights are not cheap.

In addition, licensed sets often contain unique figurines, characters from the movie that are not in other sets and make up the majority of the value of the entire comprehensive set. “It is not an exception when a set of, for example, 400 cubes contains two minifigures, and only those make up 70 percent of the price of the set,” states Radek Janáč.

Significant appreciation can also be expected for special limited sets that can only be obtained in a certain location. For example, these may be models that were only given to employees of a certain company, can only be purchased at the Lego headquarters in Billund, Denmark, or are limited series that were produced exclusively for a certain location.

The main risk of investing in Lego is damage to the kits. These are most valued if they are wrapped in the original foil.

Maybe even made of gold

Similar to investing in vinyl records, there is also a potential risk of re-issuing a given release. “A model example is the Taj Mahal kit. When production was discontinued 13 years ago, the price of the set ranged from 10 to 50 thousand crowns. Then they released a re-edition in 2017 and the price of the old model immediately dropped to around 10k. Lego doesn’t do it normally, but sometimes it does,” reminds collector Miloš Křeček.

Even in such an extreme case, however, it was not impairment in the true sense of the word. “Even though the set lost value after the reissue, the purchase price was five thousand crowns. It was still a very advantageous purchase,” he emphasizes.

It may be a consolation that Lego reissues tend not to be exact copies of the original release. For example, the reissue of the Millennium Falcon spaceship from the Ultimate Collector series (2017) differed from the previous edition by more than two thousand parts. In addition, the original editions usually, after a temporary drop, increase in price again after the reissues sell out (the case of the Millennium Falcon).

We could also mention other risks of investing in Lego, such as illegal copies or liquidity problems, but the main risk is undoubtedly damage to the kits. These are most valued if they are unused and wrapped in the original foil. “As soon as the box is damaged, the price drops by ten or twenty percent,” says Michal Saviory.

An often-mentioned advantage of investing in Lego is the low barriers to entry and easy availability: basically everyone can afford to buy at least one kit or figure that has – with a bit of luck – the potential for relatively early appreciation. Even more so is the valued Lego, which cannot be bought normally and whose profit is either the work of chance or an extreme investment.

This includes, for example, Lego bricks made of fourteen-carat gold, with which the company gifted its long-term employees between 1979 and 1981 (this June, they were sold on the Internet auction house eBay for around 500,000 crowns). And a kind of blue mauritius for Lego investors is the golden figure of the humanoid C-3PO from Star Wars, which Lego produced in the number of only five pieces in 2007 and could be won in a special competition. In July of this year, it was on sale on eBay for 4.3 million crowns.

Several figurines were made of gold, silver or other metals, but their owners are probably not tied down by the size of the storage space so much as by their reliable security or insurance. Although investment funds are also starting to appear in the world today, which will take full care of your Lego portfolio, the tangibility and emotions associated with a specific piece will probably remain an integral part of the brick business in the future.

This is also confirmed by Lego investor Michal Saviory: “I still value the set from my childhood the most, which I returned to and was able to reassemble. For me, it has the greatest value precisely in nostalgia, which is similar to many people who return to Lego today.”

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