A recent study, reported in the Guardian, suggests that investing in Lego might bring better returns than investing in gold.
Researchers at the Higher School of Economics in Russia found that second-hand Lego rises by an average of 11% annually, which it states is a bigger increase than gold, stocks, bonds, and wine. The latter, though, does have some tax benefits thanks to its classification as a “wasting asset”.
If you’re looking to diversify your investment portfolio this year, are wine and Lego viable options? Keep reading to find out.
Lego sales soar in lockdown but older sets might be where the best investment opportunities lie
The Danish toymaker saw its profits increase by 140% in the first half of 2021, compared to the same period last year. The increase is especially impressive considering the company’s strong performance in 2020, a result of coronavirus lockdowns and a newly launched tie-in with Nintendo.
But it wasn’t only kids who turned to Lego to get through lockdown. Sales of adult sets – harder to build, not to mention save up for – increased too.
Han Solo’s Millennium Falcon from Star Wars will set buyers back £699.99, while the 9,000-piece Titanic set is priced at £554.99 and designated as for builders aged 18 and over.
It isn’t just the initial price point that dictates whether a favourite Lego set constitutes a good investment though.
Older sets can have nostalgic value for older fans and fetch more as a result. The Russian study also found that limited production runs, special editions, and scarcity on the second-hand market can all add to a set’s value.
Other toys, like Barbies, train sets, and superhero figures could all be good investments too but you’ll need to do some thorough research first. Ultimately, you might find the most value comes from playing with the toys, before passing them swiftly on to your children or grandchildren.
Investing in wine could have an unexpected tax benefit if you buy enough
If you’re not sufficiently familiar with the rarity of Lego sets to consider them a valid investment this year, you might look to wine.
You’ll need to be knowledgeable – or prepared to put in an awful lot of research time – if you want to make money. You’ll need to be patient too. As with all forms of investment (including Lego and other toys), wine should be thought of as an investment for the medium or long term.
There are tax implications to consider too, so be sure to speak to us for tax advice before you take the plunge.
Wine sellers mighty promote the idea that wine investment is tax-free, but this isn’t necessarily the case. While wine can usually be classed as a “wasting asset”, this is defined by HMRC as an asset with a lifespan below 50 years. The 50 years begins from the day you buy the asset.
There is no Capital Gains Tax (CGT) to pay on gains made on “wasting assets”, but you’ll need to be sure your wine qualifies. Also remember that you have a CGT allowance of £12,300 for the 2021/22 tax year, meaning that you can make up to this amount of profit from a disposal before CGT is due.
Many wines may well prove undrinkable long before reaching 50 years old, but this might not be the case for all wines, and especially not the wines worth investing in. The “wasting asset” rules also don’t apply for Inheritance Tax (IHT) purposes, so you could still incur a 40% liability on death.
Non-traditional investments come with risks attached
If you are considering non-traditional investments, you must understand the risks attached. Investments like wine aren’t regulated by the FCA. That means you need to be confident in what you are doing and fully understand your capacity for loss.
A traditional portfolio, aligned to your long-term goals and diversified to spread risk is the best way to invest successfully and at HA&W, our team of experts can help to build a portfolio that works for you.
We can also review your portfolio regularly to ensure you are still on track and rebalance your investments if necessary. Our decades of experience mean that we are well placed to help you ignore the noise of short-term market fluctuations and the temptation to chase big returns through high-risk trend-chasing.
Get in touch
HA&W can help you to focus on the long term, keeping track of your goals through risk management and patience.
If you would like to discuss your long-term investment plans, whether in traditional or non-traditional assets, contact us to find out how our Chartered financial planners could help.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
