A couple of years ago, 35-year-old Shane O’Farrell realized something:
Investing in stocks for the long-term wasn’t going to work for him. The returns were too low. As he said, stocks won’t “get me where I want to go. It would take decades.”
So he tried something else: investing in Legos.
It worked. In just two years, he made a profit of $500,000.
Today, I’ll tell you what’s going on here — and show you how to join him.
Fort Legoredo Sells for… $2,405??
Shane O’Farrell grew up in Ireland in the 1990s.
One of his favorite toys was a Lego set called Fort Legoredo. At the time, it sold for $85.
Fast forward to today, and Shane is a service engineer in New Jersey…
And that $85 set of Fort Legoredo Legos now sells for $2,405!
That explosive price appreciation helps explain why Shane started investing in Legos as a side hustle. As he said, “The time it takes is very minimal, so I can do it on top of my full-time job and create a supplementary income.”
Curious about doing something like this yourself?
Let’s see what it takes to be successful.
The Lego Investment Strategy
To understand which sets might be most valuable in the future, O’Farrell reads various reports from Legos, including financial and trend reports.
He also keeps a close eye on which sets are being “retired” from production, because retired sets tend to become valuable in the future.
For example, in 2021, the Lego “Star Wars” TIE Fighter Pilot helmet model sold for $60. But then it got retired. Eighteen months later, its value grew to $350. As O’Farrell said, “You’re talking about a 400% return on investment in a year and a half’s time.”
Perhaps surprisingly, the Lego sets based on collaborations with big franchises like “Star Wars” or “Harry Potter” don’t always lead to big future profits.
Instead, the key ingredient for success is scarcity. For example, if a certain set is only available for sale at one store, fewer will be manufactured — and thus, the set will be scarcer.
There’s also a big market for the mini figures — “minifigs” — that come inside a set. In fact, robbers recently broke into stores in California and stole $100,000 of them.
O’Farrell believes the minifigs sold in Lego’s $460 Barad-dûr set from “Lord of the Rings” — Frodo Baggins, Samwise Gamgee, Gollum, and others — will be worth a fortune in the future.
As O’Farrell has stated, as an investor, you just need to be patient, since “value goes up over time.” To ensure that his Legos stay safe in the meantime, he keeps his inventory in a standard-sized storage unit.
As another seller and YouTube personality who goes by the name DG Bricks said, “It’s something like running a wine cellar. I’m purchasing products available today. I’m storing them safely in anticipation of some future customer, years down the line. It’s a waiting game.”
Economists Take a Detailed Look at Legos
As it turns out, there’s quite a bit of research that supports Legos as an investment.
Recently, for example, a paper was published by HSE University economists in a journal called Research in International Business and Finance.
One of the authors of the paper is Victoria Dobrynskaya, who earned her PhD from London School of Economics. Here’s what she said:
“We are used to thinking that people buy such items as jewellery, antiques or artworks as an investment. However, there are other options, such as collectible toys. Tens of thousands of deals are made on the secondary LEGO market. Even taking into account the small prices of most sets, this is a huge market that is not well-known by traditional investors.”
The authors of the paper looked at the prices of 2,322 Lego sets from 1987-2015. The dataset included information on primary sales and online-auction transactions. Only sales of new, unopened sets were selected.
Here are a few of their findings:
- Secondary-market prices usually start to grow two or three years after a set is retired.
- There is significant variation in returns, ranging from -50% to +600% annually. This is why it’s so important to do research and invest in the “right” sets.
- Prices of sets dedicated to famous buildings, popular movies, or seasonal holidays tend to experience the highest growth on the secondary market. The most expensive ones include Millennium Falcon, Cafe on the Corner, Taj Mahal, Death Star II, and Imperial Star Destroyer.
- Another attractive category includes Lego sets that were issued in limited editions, or distributed at promotional events. As noted above, rarity increases value from the collectors’ perspective.
- Average returns for all Lego sets are 10% to 11% annually. That’s more than stocks, bonds, or gold. But remember, that’s just the average. If you have a strategy for buying the most coveted sets, returns might be 600% annually.
- Lego prices aren’t tightly correlated to the stock market. For example, Lego prices grew during the Financial Crisis of 2008.
- Investing in Legos is worthwhile only if you’re doing it for the long term — e.g., more than three years. Something else to keep in mind: there are higher transaction costs, including delivery and storage, than investments in financial securities like stocks or bonds.
In summary, here’s what the study found:
“Investors in LEGO generate high returns from reselling unpacked sets, particularly rare ones, which were produced in limited editions or a long time ago. Sets produced 20-30 years ago make LEGO fans nostalgic, and prices for them go through the roof. But despite the high profitability of LEGO sets on the secondary market in general, not all sets are equally successful, and one must be a real LEGO fan to sort out the market nuances and see the investment potential in a particular set.”
An Alternative to Stocks and Bonds
As I've written in recent months (for example, here and here), there are many good reasons to invest in “alternative” assets like art, wine, and collectibles like Legos.
These reasons include diversification, a hedge against inflation, and higher returns.
If you’d like to explore investing in Legos, a site called Brick Link is a good place to start.
Just keep in mind something that Lego investor DG Bricks said, and that economist Victoria Dobrynskaya seems to agree with:
“There are a lot of asterisks that go with that eye-popping return on investment number,” he said. “You have to buy at the right price, you have to obviously pick the right sets — not all sets appreciate the same rate or at all.”
Happy Investing!
Best Regards,
Founder
Crowdability.com
