Lego bricks build wealth: Better investment than gold?

Like many other children, my own received a desired Lego set under the Christmas tree. My son got set 40601, "Majisto's Magical Workshop," which, although small, thrilled him. In a few years, when he decides to downsize his collection, he might be happy once again. This is because well-maintained toys from the Danish brand can increase in value over time.

Between 1987 and 2015, unopened Lego sets provided an average return of 11 percent per year, allowing investors to outpace inflation by 8 percentage points. This comes from the research of Wiktoria Dobrynska and Julia Kiszilowa, whose findings were published in 2022 in the scientific journal "Research in International Business and Finance." The authors analyzed sales prices from 2015 of over 2,300 sets produced in previous decades.

Similar data can be found in Falco Ziehl's book on investing in Lego between 1961 and 2020. The creators of the Brickfact app, designed for collectors of Danish bricks, claim that from 2011 to 2023, returns in this market were even higher, averaging 15.6 percent annually. However, this period includes a bout of heightened inflation, so real returns on investment in Lego were likely similar to those indicated by other studies.

It seems that in the long run, a children's toy allows one to earn more than other alternative assets like art or wine, and even more than gold, bonds, and many stocks. For example, over the last 40 years, the American S&P 500 index gained slightly over 8 percent annually (nominally), while gold only increased by 2 percent. Additionally, returns from Lego have been more stable. While used bricks may not yield similar results, they too can appreciate over time.

How did Danish toys become seen as a capital investment? The key is the sentimental value they hold for adults who played with them as children. Many are willing to pay a fortune to return to the past, especially for a complete set in its original box, even if used. In fact, empty boxes from the 1980s and '90s can cost more than the entire original set.

It's just a step from concluding that at least some of the sets on sale today could increase in value in the future, especially if they remain in pristine condition. Some collectors who bought valuable sets for themselves also started acquiring extra copies for later resale. Following them were typical investors who are not adult fans of LEGO (known as AFOL) but see an opportunity for profit in the bricks.

The manufacturer from Billund, Denmark, does not particularly try to limit the secondary Lego market, although it sometimes increases the supply of a set when it notices its popularity among adults. Alternatively, it may introduce another, very similar set to the market.

This should theoretically discourage investors ready to buy a large number of copies of one set to sell them after a few years. One famous example is the story of the Lego Ideas 21309 "NASA Apollo Saturn V" model, which was on sale until December 2019. Just a few months later, Lego began offering an almost identical rocket model, differing by one brick and the set number (92176). On the other hand, in 2013, Lego produced 5,000 gold-painted minifigures with full awareness that they would become trading objects. Today, their prices reach about $5,700.

Which Lego sets are suitable for investing? Many factors determine their future prices. One is limited supply. Another is the theme. High returns have historically been ensured by sets from the Star Wars universe. To this day, the 2007 model 10179 "Millennium Falcon" reaches prices several times higher than the larger 2017 reissue (75192).

Old sets with medieval themes show significant price increases, as do relatively new bricks from the Lego Ideas series, aimed at adults, with short runs and often referencing past sets to evoke nostalgia. Sometimes, the value of a set is determined by one minifigure, as in the case of Hulk, a character from Marvel comics. In each case, the timing of the purchase is also crucial: sets are often discounted shortly before the end of the series.

The Dobrynska and Kiszilowa studies suggest that the largest (percentage-wise) price increases were achieved by small sets—possibly because they were relatively cheap even upon resale, making them accessible to many fans—and very large ones. Among the fastest-appreciating sets were those from the girls' Lego Friends series, which debuted in 2012. However, this could be due to the fact that the first sets had limited production, as the Billund manufacturer was not yet convinced they would be popular.

Several of the features that increase the likelihood of future price increases illustrate the aforementioned 40601 set that inspired me to write this article. It is a slightly modified reissue of a medieval-themed toy from 1993. It entered the market in 2023, but Lego did not offer it separately, only as a gift with larger purchases. The supply of the set was small enough that today's prices are already twice as high as the catalog, even though the set was meant as a gift and had a catalog price for purchase and return calculations. An even larger price increase was noted for the 2022, also gift, set 40567 "Forest Hideout," a new edition of my childhood favorite toy.

However, it's important to remember that investing in Lego bricks has certain limitations and is not risk-free. This market is shallow, meaning that large amounts cannot be invested in it, and at the same time, to achieve good results, a significant amount of time must be spent building a "portfolio." The brick market is also not very liquid, although more so than, for instance, the art market. This complicates quickly pulling out from an investment. In the meantime, the manufacturer may introduce a set that reduces interest in similar sets from the past.

Finally, two caveats. I do not encourage readers to convince their children to refrain from playing with their dream sets just because adults see them as a good investment. It also seems ethically questionable to me when adults, for speculative purposes, scoop up a large part of the stock of a popular model from under the noses of children. But perhaps the status that Danish bricks have achieved creates a good opportunity to convince children that it's good to take care of their toys?

Grzegorz Siemionczyk