Should you be including Lego toys in your 401(k) plan investment menu (no, seriously)? According to a study by Victoria Dobrynskaya, an assistant professor at Russia’s Higher School of Economics, the return on investment from collecting Lego exceeded that of large stocks, bonds, and gold over the three decades ending in 2015, as recently reported by Bloomberg.
Yes, those toys made of interlocking plastic pieces that can be put together as miniature buildings, vehicles and robots and characters, are hot as collectibles. Bloomberg notes that older Lego sets are often resold online for many times their original price. In one extreme case, a kit for a Star Wars Darth Revan minifigure that retailed in 2014 for $3.99 went for $28.46 on eBay a year later – a 613 percent premium. A quick check on eBay Feb. 1 shows several sellers offering the “rare and retired” Darth Revan minifigure – in new sealed polybags – for $40 to $55.
Dobrynskaya, a 37-year-old London School of Economics PhD who spent years writing papers on carry trades and momentum investing, first looked at Lego as a topic for research after her son’s hobby steered her to a community of investors discussing how to profit from buying and selling the toy.
Per the Bloomberg article:
In a paper titled, “Lego – The Toy of Smart Investors,” Dobrynskaya analyzed 2,300 sets sold from 1987 to 2015 to measure their price-return over time. She found that collections used for Hogwarts Castles and Jedi star fighters beat U.S. large-cap stocks and bonds, yielding 11 percent a year. Smaller kits rose more than medium-sized ones, similar to the size effect in the Fama-French model (though the relation isn’t exact).
“The beta of the size factor is statistically significant and the dynamics of the Lego index we created for our research is similar to that of the size factor,” Dobrynskaya said by phone from Moscow. “Lego sets don’t show a significant correlation to the financial crises and can be seen as an attractive investment with a diversification potential.”
Lego sets themed around superheroes and Indiana Jones consistently show a strong return on investment over time. However, sets themed on The Simpsons are an exception, experiencing an average value decline of 3.5 percent.
Legos are a current hit in pop culture, with the Lego Movie 2 (starring Chris Pratt) set to release on Feb. 8, and the recent phenomenon of “The Brick Bar” – a pop-up adult playground made with more than one million Lego-like bricks that has sold out temporary stints in Sydney and London and will be coming to Denver in June.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
