Lego Sets See Strong Returns For Investors Beating Wine, Cars And Art.
Researchers have looked at returns to collectible assets from wine to classic cars, and the surprisingly result is how Lego sets hold up as an investment with some of the best performing sets increasing in price by a factor of ten over a decade. They arrive at a 11% annual return for investment in Lego sets (8% after inflation) over the 1987 to 2015 period. That's quite impressive.
Comparing that 8% after inflation return for Lego against other assets leads to favorable results. Art has been estimated to return about 4% a year after inflation, diamonds 6%, postage stamps 3%, musical instruments 2% to 4% and wine approximately 4% after storage and insurance. So even though the time periods vary, the data on the performance of Lego sets seem favorable. It is also worth noting that Lego comes out ahead of the S&P 500 over the same period, that's no mean feat as typically asset class studies find stocks among the best performing assets for the long-run.
Which sets work best?
It appears that most categories of Lego sets (with the exception of The Simpsons) have earned a positive return over time. Some of the Star Wars sets have earned the best returns but seasonal sets, super hero sets and Lego Friends are among the best performing categories. The full research paper can be found here.
Also, size matters, it’s often the smallest sets that deliver the best returns and medium-sized sets can fare worse in price appreciation. As of 2015, the Collector’s Edition Millennium Falcon, a Star Wars set, offer the best return, trading for 2 712 pounds.
Should you invest?
Nonetheless, there are issues in investing in Lego. First off, you need to store the sets in good condition. While that’s not a complex as wine, it still requires some available space and well as the time, effort and potential fees involved in ultimately selling a set.
Secondly, as with all things investing-related, people react to information. Seeing high returns on Lego sets could well encourage more collectors to buy sets, hence increasing supply and reducing the premium available to sets no longer in production. It’s also hard to put real money to work with a Lego set investment. With 800 sets a year, there are plenty to choose from, but at an average price point of say $30, then you’ve still only invested roughly $24,000 if you buy every set on the market in a given year. In contrast, far larger sums can effectively be invested in stocks and bonds with lower transaction cost, potentially more favorable tax treatment and greater liquidity. Nonetheless, this is actually a reason the attractive returns to Lego sets could last, it’s hard for big money to swoop in and capture these potential gains.