Could LEGO be a better investment than gold?

With the festive season now out of the way, many parents and grandparents are likely to have helped youngsters build a LEGO set or two.

A much-loved toy for many generations, there are trillions of plastic bricks in the world keeping kids busy for hours, but did you know that they may be worth more than gold?

According to a new study from the Higher School of Economics in Russia, LEGO can offer a greater return on investment than “bonds, gold, and many collectible items, such as stamps or wines.”

This may sound farcical, but the economists behind the study have shown that tens of thousands of deals are made on the secondary LEGO market each year, with even single blocks or figures fetching incredible prices.

However, before you start digging through the toy box or rifling through your cupboards and loft, there are variables that come into play.

First is that LEGO sets often get produced in limited quantities. Especially collectible LEGO sets, which are tied to popular, cultural icons.

Secondly, is the number of sets or pieces currently available on the market. Some parts are rare because lots of people have simply thrown them away, others because collectors are hoarding them.

According to a release from the Higher School of Economics: “Prices of small and very big sets grow faster than prices of medium-sized ones, probably because small sets often contain unique parts or figures, while big ones are produced in small quantities and are more attractive to adults.

“Prices of thematic 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 the Imperial Star Destroyer).

“Another attractive category includes sets that were issued in limited editions or distributed at promotional events: rarity increases their value from the collectors’ perspective.”

The researchers say that LEGO offers investors a lower cost entry into investment than jewellery, art or gold, but could offer even greater returns in future, based on historic data from the second-hand collector’s market.

However, the returns do vary greatly (between -50 per cent to +600 per cent per annum) and that investment is only worthwhile “in the long term (i.e., over three years) and incurs higher transaction costs (e.g., delivery and storage) than investment in financial securities.”

Although most of us won’t be rushing out to invest in LEGO, this report does point to the importance of a diverse portfolio, which includes tangible and intangible assets.

Link: Toys Prove to Be Better Investment Than Gold, Art, and Financial Securities

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Posted in IFA News.