The first thought that comes to most minds when talking about LEGOs is that they are used to build objects, build vehicle replicas, doll houses, but increasingly also build investment portfolios? LEGO investing has in fact become increasingly popular in recent years as an alternative form of asset investment. This is due to many theorising, and then publishing academic studies, which reveal that the return on investment for traders in LEGOs is in some cases higher than other product categories including bonds, stock, and even gold.
Building blocks for future returns?
This was the finding of a study published by the Research in International Business and Finance journal, conducted by the Higher School of Education in Russia, which examined online auction results, LEGO sales data, and the historic value of over 2,000 unopened LEGO sets dating back from 1987 to 2015. Researchers found that in secondary marketplaces for the sale of LEGO sets, their value grew by approximately 11% annually. This is a significant finding, as it highlights that investing in LEGOs may yield a higher return on investment than other traditional investment options.
Why are people investing?
There are several reasons behind the rationale as to why people choose to invest their money in LEGO sets. These include:
Nostalgia factor as many adults who played with LEGOs as children have a strong emotional connection to the brand and enjoy collecting.
Potential for appreciation in value as certain LEGO sets, particularly those that have been retired or were released as a ‘limited edition’ collection promoting a movie, film or book, can see their value increase substantially over time.
Strong brand loyalty and high demand can be used to understand the high yielding results of LEGO.
Of course, the basic laws of supply and demand are also at play here, as increased demand for limited edition LEGOs will certainly increase their value. However, before investing in LEGOs, one must take note that their prices can vary significantly. The study found that most sets increase the most two or three years after LEGO had ceased manufacturing them. Once more, movie set related LEGOs tend to see the largest increase in value, though this is quite a wide observative given how many movie related LEGOs have been created since the company’s establishment in the 1930s!
Additionally, it is also important to highlight the consideration of transaction costs when investing in LEGOs. Profit markets from selling physical goods such as these on secondary markets can fluctuate significantly, and transaction costs also play a role as shipping goods across vast boarders hits the bottom lines of merchants.
Key Takeaways
LEGO investing has, academically at least, been proven to be a profitable alternative form of investment in recent years. Nonetheless, as with any investment, it is important investors do their own research and understand the risks involved before making any financial decisions.
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Disclaimer: Any information presented is for general education and informational purposes hence, not intended to be and does not constitute investment or trading advice or recommendation. No opinion given in the material constitutes a recommendation by M4Markets that any particular investment, security, transaction or investment strategy is suitable for any specific person.
It does not take into account your personal circ*mstances or objectives. Any information relating to past performance of an investment does not necessarily guarantee future performance.
Trinota Markets (Global) Limited does not give warranty as to the accuracy and completeness of this information.
