To build a nest egg it may be worth investing in Lego. A study has found that the world’s most popular toy has outperformed other assets including gold and the shares of large companies. The catch, of course, is that to make a profit you must leave your Lego unopened.
The research shows that second-hand Lego sets increased in value by an average of 11 per cent a year between 1987 and 2015. By comparison, the FTSE 100 delivered a 4.1 per cent annual average return between 2000 and 2015, while gold achieved 9.6 per cent.
“Lego investments outperform large stocks, bonds, gold, and other typical ‘hobby investments’, such as wine or stamps,” the authors of the study said.
Not every box of Lego is a winner, however. The performance of individual sets ranged from annual losses of 50 per cent to gains of 600 per cent. “It is important to remember that it is difficult to know which set will succeed and the high returns are not guaranteed,” Victoria Dobrynskaya, of the National Research University Higher School of Economics in Russia, who led the research, said.
Serious Lego investors often hunt for sets that are on sale because they are more likely to appreciate in the long run, Dobrynskaya said. Prices tend to increase two to three years after a set disappears from the shelves. “It is very important to be a fan of Lego and to know the market very well,” she said.
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The study, which is being published next month in the journal Research in International Business and Finance, reviewed the prices of more than 2,300 types of Lego set on the secondary market, which has tens of thousands of transactions a day.
It suggests that Lego can be considered a safe haven in times of financial upheaval. The secondary market delivered positive average returns in the crisis years of 2002 and 2008, when the markets plunged.
Very small and very big sets have tended to do best. “Small sets often contain unique parts or mini-figures, whereas huge sets are released in limited editions and are popular among adult collectors,” the researchers wrote.
Some themes are more collectible than others. Lego from the Ideas series — where fans of the toy get to suggest the concept — have achieved annual returns of 64 per cent. For sets based on the video game Minecraft it was 46 per cent; for Star Wars it was 17 per cent.
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But the main force behind the price increases, Dobrynskaya said, is diminishing supply over time. “Thus, Lego and other collectible toys can be compared with fine wines,” she writes in the study.
“Once a bottle of wine is opened, the supply of this unique wine declines. Once a Lego box is opened, the supply of this particular set falls. Eventually, old Lego sets become rarer, collectors hunt for them, and their prices rise.”
