Is Investing in LEGO Better Than Investing in Stocks?

Category: Investing

By BrickBucks

Returns, liquidity, fees, taxes, effort, risk — the head-to-head on six dimensions that actually matter.

"Investing in LEGO" and "investing in stocks" are different exercises that share a label. Comparing them fairly requires looking at six dimensions, not just the return number. Here's the honest scorecard.

Returns

• Stocks (S&P 500 index): ~7-9% compounded annually over the long run, with significant year-to-year variance.
• LEGO (top quartile of retired sets): 12-18% compounded annually.
• LEGO (median retired sets): 6-9% compounded annually.
• LEGO (bottom quartile): flat to negative.

Winner: LEGO, but only in the top quartile and only with theme selection skill.

Liquidity

• Stocks: seconds. Click sell, settle in T+1 days. Cash in your account.
• LEGO: 1-6 weeks for popular retired sets at fair prices. Months for niche items. Selling under pressure costs 10-25%.

Winner: Stocks, by a huge margin.

Fees

• Stocks: 0.03-0.10% expense ratio on index funds. Zero commissions at most modern brokers.
• LEGO: 13-15% eBay platform fees plus payment processing plus shipping (~3-7% on average) = 16-22% all-in on sale. Plus storage and insurance costs annually.

Winner: Stocks, by orders of magnitude.

Taxes

• Stocks: long-term capital gains rates (0%, 15%, or 20% federal in the US depending on income). Dividends taxed at qualified rates. Clean accounting.
• LEGO: hobby-loss rules vs business activity rules vs collectibles tax (28% federal long-term capital gains rate on "collectibles" in the US). The IRS treatment depends on how active your selling activity is. Consult a tax professional.

Winner: Stocks. The tax code is simpler and the rates can be lower.

Effort required

• Stocks: set up an automatic monthly index fund contribution. Done. Total ongoing effort: ~1 hour per year for tax season.
• LEGO: research themes, source sets at MSRP or below, store properly, monitor market values, time exits, manage individual sales, handle shipping and customer service. Hours per month at minimum.

Winner: Stocks, by a wide margin, for passive investors.

Risk

• Stocks: market-wide downturns, individual company failures (mitigated by indexing). 30-50% drawdowns happen every decade.
• LEGO: theme-specific risks (re-releases, licensing changes), storage events (fire/flood/theft), platform risk (eBay policy changes), liquidity risk under stress. Smaller drawdowns but more idiosyncratic risk factors.

Tie. Different risk profiles, not directly comparable.

Diversification

• Stocks: an S&P 500 index fund is 500 companies across 11 sectors with one purchase.
• LEGO: a $10,000 LEGO portfolio is maybe 10-20 sets across 3-5 themes. Much more concentrated.

Winner: Stocks.

The honest scorecard

Who LEGO investing is right for

• You already enjoy LEGO and would buy sets anyway.
• You have storage space and disposable income beyond your core retirement accounts.
• You enjoy the research and treasure-hunting aspect.
• You're comfortable with illiquid assets that take effort to manage.

Who should just buy index funds

• You want growth with minimum attention.
• You might need to liquidate quickly.
• You don't want to think about insurance, storage, taxes on collectibles, or eBay disputes.
• You're at the start of building a retirement portfolio.

The right answer for most people is both, with stocks dominant: index funds for the core retirement portfolio, with 5-15% in LEGO if you find it genuinely interesting. For the broader comparison, see is LEGO better than stocks and gold.

Further reading: the ultimate guide to LEGO investing · a beginner's guide to LEGO investing.