Moral of the story, open your eyes, you never know what you can find.

We all like getting a set cheaply but how much difference does a 20% discount make compared to a 25% discount? Well 5% isn’t it? Actually no, it’s more than that. The price you pay sets the starting point for your investment and paying 5% less can make a greater difference than you may think. The easiest way to explain the maths behind this is to look at a few examples. I’m going to take a couple of popular well known sets, one recently retired, the 10212 UCS Imperial Shuttle, another longer EOL set, the darling of the investment world 10179 UCS Millennium Falcon, and a lesser know set that has performed pretty poorly investment wise in comparison, the 7259 ARC-170 Starfighter from 2005.

Here is a table that looks at each of the 3 sets and compares the CAGR and ROI you would have if you purchased the sets at various levels of retail discount in 5% increments:

The “Retail” column shows the current CAGR that you can find listed on each sets respective Brickpicker information page. Working across we have the returns you would actually have if you purchased the sets at 5%, 10% etc discount off retail. The results are fairly staggering. Lets look at a common discount – 20%. If you got 20% off the 10212 Imperial Shuttle then your current ROI would be 65.33% not 32.27% that’s more than double! Plus your CAGR, which remember is an average annual compounding percentage, would be 18.25% compared to 9.77%

It’s early days in the post retail life of the Shuttle, but the effects of discounts on the already hugely successful 10179 MF push it further into unbelievably good levels. Perhaps even more interesting is the effect on a mediocre investment like the 7259 ARC-170 Starfighter. With just a 2.36% CAGR over the 8 years since release this set could be considered a flop, but if you had managed to score a few sets at 50% on a clearance deal then that would turn this flop into a solid investment with an 11.36% CAGR.

Bear in mind that these calculations take the release year as the starting point for the growth of the set, just the same as the Brickpicker data page for each set does. An interesting and perhaps more accurate point would be looking at taking the year of EOL as the starting point, but that’s a topic for a whole other blog post… Also at an individual level many investors would be wise to utilise the date of purchase as their starting point in doing their own calculations.

The effects can be represented better on a graph. Here is the above table in a more visually intuitive presentation:

The graph shows nicely the increase in CAGR returns for each of our three sets as ratchet up the discount levels. What it illustrates is that the relationship is non-linear i.e. each line is not straight, in fact they all have distinctive upwards curvature. This means that the discount levels have exponential growth effects on your investment returns. The difference between a 30% and 40% return is greater than the effect between a 10% and 20% return.

What is also evident is the difference in the slopes of each sets’ lines. Sure they all start from different point reflecting the current disparities between each one in terms of great to poor investment. But the exponential slope growth mentioned above is more evident for the 10212 Shuttle than the others, the 10179 MF is second and the 7259 is the flattest. This is due to the age of the sets, and nothing else. Because the 10212 Imperial Shuttle is the new set it only has to spread the returns across 3 years, whereas the MF and ARC-170 have 6 years and 8 years respectively. The older a set then the lesser effect a change in purchase price will have on the CAGR because it is averaged across a greater number of years.

Many of you investors out there know all this information already, but it’s good to have things quantified a little and hopefully some of the newer members or starting investors will find a nugget of info here that shows them why we are always seeking out good deals. Discounts have the power to transform poor investments into average ones, average ones into good ones, and good ones into great ones! Keep seeking those discounts, and keep sharing them here on Brickpicker!

I just saw an interesting story pop up on Brickpicker's front page from the website brickultra.com. In it, they explain that an expansion to TLG's current Czech Republic factory is in the works. This comes on the heels of stories released earlier this year that Lego is planning an expansion to their Hungary factory, another expansion of their Connecticutsite, and construction of a new factory in China.

That's four expansions announced in the last year!

While this matches TLG's explosive growth chronicled in their 2012 Annual Report, this information should raise an eyebrow for investors. Only TLG can control the supply of sets in the market, and if they overproduce, unsold sets could lower the secondary market prices, and depress investor secondary market gains for future investment sets.

However, a closer look at the expansions should provide a little relief to investors. First, the Hungary and Czech Republic expansions are linked: the Hungary facility is primarily a Lego molding facility, while Czech Republic is a packaging/distribution facility. The Hungary expansion necessitated the Czech Republic expansion, so Lego will not increase their capacity by a factor of two.

The Connecticut expansion appears to be primarily for their Research & Development team (hopefully with some new, exciting designs coming our way!) and, perhaps, their US Sales department. More complex and appealing sets should provide some new, exciting and hopefully investable sets.

As everyone knows, China and East Asia are burgeoning markets for TLG. A new China factory will attempt to capitalize on Lego's popularity in these markets and aim to provide them with the Lego sets they're so eager to purchase. I don't see this as a negative for either European or United States Lego investors. To the contrary, new Lego enthusiasts may look to sellers in established markets for sets that were not available to them a few years ago. Any increase in demand in Asia can only be good for investors in established markets in the short term.

Surprisingly, the news on most of these expansions appear to be good for investors with the Hungary/Czech Republic expansions the possible exception. More production for European markets may increase the number of sets available to retail buyers, however TLG would typically expand only if there was significant unmet demand at their current price points. I don't see this increased capacity drastically increasing secondary market demand, so investor prices should remain stable.

What do you think?

I'm particularly interested to hear from Australian investors. Since their Lego pricing tends to be very expensive, a new Chinese factory coming online may decrease some of the freight costs and lower Lego prices for Aussies. Or, if TLG feels their price point is competitive in the market, they could pocket the freight cost savings.

Do you take milk that's about to expire, or do you pull from the back?

Do you buy the candy bar that's been callously crushed into bits, or the perfectly whole one?

The shampoo bottle that looks like it's filled more to the top than the next?

I am the latter, in every case. If you're in this business, you're probably also trying to get the most for your money.

"But LFoW, the box doesn't matter, as long as the bags inside are sealed!"

Well, not exactly. While I should point out that it is true that the value of your set won't really suffer because of your box condition (unless it's been through the seven hells), to say it doesn't matter is ignorance.

Look at it from your buyers perspective: Why would I pay $120.00 for your set when this other guy has the same set at the same price and his box is prime shape?

That small factor, one you insisted played no role in the value of your set, just lost you the sale to someone else.

While having a perfect box doesn't matter to some sellers, again put yourself in the buyer's shoes; it isn't about you. Some buyers want to display their sets, or their boxes. Some want to encase them in plastic or get them graded. Some even resell the boxes aftwer building the set to recoup a little cost. Any way you slice it, the box matters to these types of people, so it should matter to you.

On the flip side, buying a set with a damaged box has one very important advantage to consider: Some retailers will discount your product.

This will instantly change the game for you, as you can afford to go lower than your competitors and make the same profit.

fAside from that, and maybe not having to worry as much about keeping the box in good shape, there's no real reason to not hunt out the best box possible.

One last tip: Some retailers like Walmart or Target will occaisionally allow you to exchange an item for an identical item, sometimes without even asking for an ID. I have done this to get slightly better boxes before. YMMV.

So find that gloss, heat gun those stickers, and seal it up in a waterproof, airproof bag. your next buyer wants an AFA 9+!

Here is a link to the new article. Hope you enjoy it! This and the myths/truths articles really were my favorite to write, but stay tuned for more...

There are a few key points I wanted to stress in both of these articles:

1. Don't follow the herd when selecting sets. Make your own decisions based upon data. Instincts can play a role in investing, but good instinct is usually based upon experience. For those that have never experienced a sales cycle, your instinct has not been honed well enough to use it exclusively. USE THE DATA this website provides and build intuition.

2. Be SYSTEMATIC in your porfolio construction. Understand what you're buying and make rational, informed decisions based upon data. Run each opportunity through your selection process/criteria systematically rather than making a run for the next sale.

3. Feel free to listen to others giving advice on this site, but never use it as gospel. There are few, if any, that would try to provide bad advice in the forums, but all investors have different investment profiles.

I have been impressed with emes' investment strategy, and it embodies all three points above. He uses information from this site to systematically select sets that fit his investment strategy. His strategy is based upon his desired risk/return investment profile, not by chasing the next hot Amazon deal that pops up. I urge everyone to read his posts to understand what an alternate (and perfectly legitimate) investing strategy can look like, and how it's executed.

Good luck with your investing!

Pros

• Incredible detailed, and very realistic
• The nested band shells make the model - exquisite modeling for these
• Continues the world landmark sets
• Appears it will be a phenomenal investment set
• Smoky gray transparent bricks nicely mimics glass

Cons

• The base, while a great source of rare dark tan bricks, is so monotone and frankly, boring
• There is very little to bring it to life - it is strictly a model
• Light poles appear too chunky for the scale of the model
• "Water lines" similar to the Tower Bridge model could have provided an additional realistic detail
• Model will be very difficult to display given its footprint

Don't get me wrong, I still think this is an inspired model with a brilliant design, but the base really bugged me. Perhaps the designer wanted to feature the sweeping arcs of the nested bandshells, but I thought Lego missed a home run by not providing a little setting/detail for the base. One of the appealing details of the Tower Bridge was the designer's inclusion of the cars/lorry/bus for the bridge, and I just wish something similar would have been provided with this.

I also think the price point is a little high. At $320, it's nearly $100 more than Tower Bridge, a fairly sizable discrepancy.

10234 Sydney Opera House will be a no-doubt investment winner. Perhaps its high price point will depress sales and make secondary availability that much more appealing.
 

I selected 18 different and large sets from the themes I mentioned above and that were released before 2010, so most of them have been out of the shelves for around 3 years already. Also, the prices are based on the last 12 months showed on Brickpicker's Price Guide. Let's see some of the results:
 

As you can see above, most of the sets that are part of the themes I mentioned above share the same price drop once the December comes around. Even more, some of the sets above actually experience their lowest price of the whole year during the holidays. There are only a couple of exceptions in the table, so I think it is pretty safe to say that this "December effect" is actually more common than I originally thought.

It is somewhat hard for me to explain this effect other than by checking the number of sold listings over the past 12 months in BP's Price Guide. There is a widespread belief that December is the investor's best bet to maximize profits, so it seems likely that a lot of people just wait to sell during this period and as a consequence increase the supply of the sets. If you actually go ahead a check the number of sold listings, in effect most of the ones in the table present the highest number of sold copies during this month. This is probably one of the major causes for the dip in value most of them experience

Other than that, when I digged a little deeper I noticed that this seems to be the case only with a small number of the popular themes. Some other themes do in fact present a spike in price around the holidays, making the phenomenon a little harder to understand. Price of the sets may also be a factor as the sets from the themes included in the table tend to be the pricier ones, maybe causing the increase in supply to really manifest itself very sharply.

What does this mean for the LEGO investor? well, it would seem that sellers of the themes above should really consider getting rid of their inventory at some other point around the year, otherwise the data seems to suggest they will be taking quite a hit by selling when everyone else is as well.

This short blog article was just a little over the surface kind of analysis, but I felt that it was very important for me to throw it out there and start some level of discussion about the reasons and the validity of this December Effect. I am sure some of you have more insights on this, and I would really like to see your comments.
 

Here is what they have in their fine print:

*Free Shipping Every Day offer applies to online and catalog orders only. Qualifying purchase must be equal to or greater than $75 in merchandise only; any applicable taxes or value of gift cards purchased do not apply to merchandise total. Once your order reaches $75 free shipping will automatically be added to your order. Free shipping is via standard ground service; upgrades do not apply. If you choose another shipping option, additional charges will apply. Standard order processing and delivery time is 3-8 days from the date of order. Free shipping valid only in the contiguous United States and Canada. LEGO Group reserves the right to cancel or modify this promotion at any time without advance notice.
 

I personally will be using this space to talk about the site including new features, changes and anything else related to the site. Any important announcements will be posted here and of course I will share any great LEGO hunt stories that I have.

Here are a few simple guidelines:

• Must be LEGO related
• Hopefully has some substance to it, not just a two words like"Hello World!"
• We are not looking to turn this into a place to spam advertisements about your sales. It depends on what it is, but we hope its not the only type of posts you do. But we encourage you to talk about your business. This is something we will try to find a happy mix to make it worthwhile for everyone.
• Please be respectful to your peers
• Create meaningful titles that truly relate to your posts.
• Don't copy the blog news stories from the other blog sites. If the content is relevant and you have your own spin on the story, then that is great. But no plagiarism!

Posts will be approved by Admins and Mods, especially here at the start so that we can begin to see how the whole thing unfolds. You have the ability to create categories for your personal blog to organize your posts. If you write an outstanding editorial on your own and we feel it can be a main Brickpicker blog, we will feature it and you will get bonus brickpoints. Speaking of Brickpoints, we will give you 250 Brickpoints for starting your community blog. We will also award 10 Brickpoints for every approved entry that you post. If members like your content and start to post comments to your editorial, then you will receive 1 Brickpoint for every comment posted.

The goal Ed and I are trying to achieve is to create a fun, helpful and interactive community. We want your voice to be heard and we know people learn through sharing experiences. This is not required for anyone, it is there for you use if you wish to use it. This is also a stepping stone to what is coming around the corner and the continued growth and enhancement of Brickpicker.

So create your blog and start blogging!
http://www.brickpicker.com/forum/index.php/blogs/

Look for this button below:  
 

Just a note. Even though you are free to do reviews, evaluations, etc. These entries do not count towards the current running contest unless you let us know that is what you wrote it for. Write your blog entry and if you feel it's a good fit four our main blog or evaluation corner article, please send Ed and myself a PM so that we can review it. We just want to make it clear that the number of posts you do on your community blog does not have anything to do with the contests unless we are informed that your blog entry is being written for the contest.