Different Strokes: Investment Strategies Discussion

Investing, trading, speculating, flipping, gambling, hoarding, whichever “-ing” you decide to label a particular strategy with they all boil down to one thing – making money (well maybe not hoarding!). The handle you attach doesn’t really matter, we don’t need a label to neatly categorize different strategies into compartmentalised silos. Personally I use investing or investment as a catch-all term to encompass any form of buying an asset (Lego in this case) for the intention of resale at a profit. It’s not a label, just a generic term to describe making money. Text books differ on the precise meanings of all those terms I listed before, but it’s not about labels, it’s about strategies.

All strategies have situations in which their application becomes warranted as they are dependent on many circumstances. These include but are not limited to:

• A persons appetite for risk
• The future prediction (in the investors mind) of market prices
• The amount of capital the investor has available
• Cashflow restrictions
• Regional or other geographic price differences
• Storage space
• Purchase price vs current Ebay (or other selling market) price
• Time available for investor research and selling logistics
• Whims, hunches, gut feelings – personal opinions

Different strokes for different folks.

Not all strategies are “optimal” in terms of an economic profit perspective, but most are considered “right” if a rational person has made a reasonably rational decision given the information they had available at the time.

Investing strategies are also not often able to be applied to specific investors. Many investors, myself included, utilise many different strategies depending on the situation at the time of purchase and on which particular set they are buying. Yes there are some investors that have one strategy only and stick to it fairly rigidly, and that may work for them, but the majority of members I see talking about Lego investing on this site employ different tactics.

I have learnt a lot about different strategies from members here, some of which I use and others I don’t. I thought it would be useful to just list all the ones I know of and a brief description and examples of them. Perhaps there are some you don’t know about or have not heard of. A list like this also highlights the many options we as Lego investors have open to us to try and make some money.

TIME BASED STRATEGIES

Short Term - Selling as soon after purchasing (usually at a discount) as possible if the market price is decently higher than the purchase price. Often used for:

• Flipping large volumes of sets purchased at a discount
• Especially for sets that have lower future growth predictions
• Importing from other markets and selling locally

Medium Term – Purchase and hold for 1-2 years.

• Hold sets until Christmas or other seasonal spike (e.g. Monster fighters and Halloween)
• Hold sets currently in retail until a few months after EOL and sell as growth slows

Long Term – Hold for 3-5+ years

• Waiting until secondary supply has dwindled
• Squeezes out as much growth as possible

RETURN TARGET STRATEGIES Hold Until X% Profit – Wait until market price hits an amount that gives you at least X% returns

• Can be Net Profit (after costs) or Gross Profit based
• Will be different hold times depending on the set, could be instant, or could be years

Hold Until $X Price - Wait until market price hits a specific amount.

• Buy a set or sets and wait until they hit $X
• Essentially the same as the one above but sometimes people think more in raw dollar terms than ROI percentages

SET BASED STRATEGIES Grinding – taking large volumes of small sets and selling large volumes

• Smaller profit margins but repeated many times
• High selling volume requires good logistical systems

Big sets only – Only buying sets over $X or X piece counts

• Less sets to track
• Big set prices means return percentages translate into larger $ amount profits

Theme Specialising – Buying from only one or two themes or subthemes

• Easy to research and track quickly making the investor a probable expert
• Or maybe just polybags, or minifigures…

PARTING OUT Minifgiure Seperating

• Take out the minifigures to sell separately then sell off the rest of the set
• Takes advantage of discrepancies between market prices and the sum of the market prices for the minifigures plus parts

Complete Seperation

• Selling all the parts separately like on Bricklink
• Resource intensive
• The sum of the parts is greater than the whole

USED SETS Whole Sets – Complete used sets purchased

• Just like investing in a new set
• Can utilise any other strategies in conjunction
• Data is all available on Brickpicker for used sets

Bulk Lots – Buying big piles and selling off

• Make up the sets they contain and sell them off separately
• Sell of the parts in lots
• Can be resource intensive

I’m sure there are many more, please list some in the comments if you have any. Strategies may also be a hybrid of the ones I listed, there are many possibilities.

Strategies are also able to be changed or abandoned. If you are waiting for growth that isn’t happening you may want to cut your loses and free up the capital for something else.

“What choo talkin bout Willis?”

I think what I’m trying to put out there in this post is don’t get hung up on the semantics and terminology of what we are doing here. Just appreciate a well thought out and explained strategy for its merits not its label. Plus it’s a basic list of some of the more highly used strategies available for investors to use.