The Best Investment You’ve Never Heard of: LEGO
An introduction to a market that many don't know exists
Today’s post is brought to you by Jarek Lewis who specializes in the art of LEGO investing (yes, the toys).
If you are looking for a creative way to increase your credit card spend, it’s one of the best games in town and hilariously profitable.
Make sure you sign up for his newsletter “The Introvert Entrepreneur”
I want to introduce you to a type of investing you probably didn’t know existed.
However, before I do that I want to touch on:
What the point of investing is
The difference between active and passive investments
What is considered “normal” when it comes to investment performance
Why We Invest
Investing is the simple act of attempting to appreciate or preserve your capital. I think you and I can both agree with that.
The Difference Between Active and Passive Investing
There are two types of investing:
Active (Requires consistent effort over time i.e. starting a business)
Passive (No work required i.e. stocks/bonds)
Active investing is almost always more lucrative but requires constant time input on your behalf.
Passive investing requires little to no attention, but yields a lower return on investment (ROI).
What “Normal” Investment Performance Looks Like
On the passive side, generally anything over 15% average annual ROI is likely a ponzi-scheme.
When it comes to active investing, well over 100-200% annual ROI is pretty normal especially during the early stages of business growth.
This is why I always recommend filling your plate with as many active investments as you can handle before venturing into the passive investing world.
Investing in sealed LEGO sets (the right way) allows you to capitalize on the best of both active and passive investing.
Allow me to explain.
LEGO has the same unique characteristics that sealed trading cards have.
Once a LEGO set is no longer manufactured (we call this “retirement”), supply becomes capped.
As they are unsealed by various children and collectors, the supply of sealed sets decreases over time. ‘
So long as demand exists, this results in an increase in value for the LEGO set.
The demand assumption is a safe one. People love LEGO. Kids love them and adults collect them.
The company has grown tremendously over the last several years.
That’s not the whole story though.
When LEGO sets retire, a funny thing happens. ~95% of the time, all retailers run out of stock right around the retirement date.
It is then up to third parties (like you and I) to supply the market with inventory, which often results in what I call the “retirement pop”.
The first part of the retirement pop is when the price of many LEGO sets jump in value by 20-30% on Amazon around their retirement date.
The second part of the pop is a rapid climb in value for 6-18 months (50-200%) before slowing down and acting like a traditional asset.
By capitalizing on this retirement pop and holding for roughly 12 months it is possible to achieve returns like no other market can.
Here is the two step process to my personal LEGO investing strategy:
Buy LEGO sets that are due to retire at discounted prices in the second half of the year (20% OFF is easy to find)
Hold for 12-18 months and then sell on Amazon
The difference between 50% annual ROI and 100% annual ROI is the sets you choose to invest in.
I’m not the first person to realize how powerful this type of investing can be.
There are plenty of people on YouTube that have been talking about it for longer than I have.
However, I am the first person to not only highlight the existence of the “retirement pop” on Amazon but also publish monthly data in written form inside my newsletter.
You can view that data as well as see every LEGO set I own and plan to own in the near future here (link).
Looking Forward
Is it possible that we enter a recession and consumer spending slows down so much that this isn’t as profitable?
Yes.
However, that didn’t even happen during the 2008-2009 recession:
LEGO values rose as real estate and stocks plummeted.
Yes, that’s right. LEGO investing has been around for decades.
Now… Are the returns I’ve discussed guaranteed? No. Nothing in life is guaranteed.
That said, the greatest risk of all is never taking any risk.
It just so happens that LEGO has the best risk/reward profile I’ve ever seen.
You can take advantage of that by subscribing to my newsletter
or you can ignore it. The choice is yours.
This post is not financial or investment advice.
It is written for entertainment purposes only by a bum who gave up his job as a prestigious aerospace engineer to talk about parking money in sealed boxes of plastic.
Collectibles is a nice way to pay anonymously too!
how much min. volume in sets per month (or spend per month) do we need to pull out on sets for this to be worthwhile? :)