Flipping vs Buy and Hold

Grolim · 2013-02-26T21:47:11.000Z

I have read a lot of good posts with in depth discussion of investing recently. This latest one http://www.brickpicker.com/index.php/forums/viewthread/2360/ being a great example. A very good read and some great info in there from the OP and other posters. One thing I'd like to pick up on is the "buy and hold for 2-3 years" strategy. A tried and proven strategy for most sets to make good returns. However, don't underestimate the power of the fast sell or "flip" strategy. If you can find sets at a good retail discount and flip them fast for retail price you can make very good returns. This can be achieved with many sets if you do some research. You want sets that seem to have fast, short production runs, like Monster Fighters, LOTR, Friends etc. Also you may need to be prepared to take advantage of international market differences. Lets look at an example: 1) Buy a $200 set for 25% off, so $150. Hold onto it for 3 years and lets say it generously quadruples in value to $800, so a nice $650 in gross profit, minus 11% in fees so just under $562 Net Profit, great! So a 374% return, or almost 94% per annum (on average). Awesome! or 2) Take your $150 initial capital and buy that $200 set for $150. Flip it immediately for $190, $40 gross profit, minus fees so $19 net profit. Or 12.7%. Great but not huge! However you flipped fast so you get your initial $150 capital back, so you can then go and use that to buy another set. Rinse and repeat as often as possible. Lets say you flip that $150 once a month. That means you make $19 x 12, so $228 in the year. Over 3 years you make $684 net profit, that's a return of 456% or 152% per anumm, now we are talking! So as you can see, flipping can be just as profitable if not more so than buy and hold. Sure, there are other factors that might come into play. Shipping is probably the big one. If you pay for shipping that can eat into your profits fast. However I have found that if you are selling at or slightly below retail most customers assume to pay something for shipping, as they do at traditional online stores (usually) so are quite used to it. Therefore shipping could or should be zero sum. Another is time - yes flipping takes a lot more work, that's something each individual values differently. My point here is not to say one strategy is better than the other, just to show that they can both be good. Conversely they can both be bad! I like to use a mixture of both for my investing. What do you do?