THE most important question -- When to sell?

azalon · 2012-11-25T09:23:03.000Z

Well, I had a few paragraphs and then realized something . . . My own thread title is WHEN to sell, not what happens when you sell. I had scenarios and Ebay fee calculations and numbers etc. But I realized I just need to keep this simple and directly to the question. When is the best time to sell your Lego sets? And why? First off, they would obviously have to be retired so that the value has risen. Secondly, it matters how much you paid per set. A larger discount from the MSRP will always be better in the long run, although I'd rather pay full price for a set like Diagon Alley than wait for a discount and miss out. If that set rises to $350, I really don't care if I got it for $150 or $135. Say your margin is 20%. So when the set you paid $100 for rises to $120 you will sell. Nope, that doesn't work because the fees eat up your 20%. So a $100 set(the price you paid) would have to sell for $136 in order for you to profit by $20. That's without the cost of intangibles: packing material, shipping box if you need one, printing paper and ink, gas to drive to the post office, and so on. I'm also not including Ebay discounts such as Power Seller discounts. Would you sell? Let's say that is your margin. 20% after all fees. That means that when a set rises in value by 36%, you sell it on ebay and you net a 20% profit. Is that enough? Do you hold out for more? Should you? One one hand, here's what could happen if you rolled your inventory over once per year. If you started with $10,000 and bought Lego sets, waited for them to retire and reach that 36% increase, you would obviously wind up with $12K. Sounds great. You have an extra 2k to reinvest! Errr, what about taxes? And it would be nearly impossible for every set you have to retire AND rise by 36% each and every year. So this would have to be a long term situation where you invest per month or per year and roll your inventory--or ladder your inventory--on a 2-4 year basis(a whole other story!). But if you did reach a point where you could sell 10K per year and make your 20%, after doing that for 5 consecutive years that 10K would reach almost 25K--without taxes, which you gotta pay! Same question though, with all that in mind . . . would you sell for a 20% return? Going for a 30% return? Good for you! But that means the set would have to rise in value by 47% over its original MSRP. But the 5 year ladder is now over 37K. That's a lot of money to reinvest. And yes, let's just say you DO have the room for all those sets. You wouldn't have to use any new money too. But how common is it for a Lego set to rise in value by 47% and how long does it take? Looking at my personal Brickfolio, my Indiana Jones and Kingdoms have passed that--yours could be different based on sale prices, not sets purchased at MSRP. And right now, I'm pretty happy that the Indiana Jones sets that I still have (sold a few over last 12-18 months) at all over 100% increases from my purchase cost. The problem is being able to have a complete sell through of your entire inventory, every year, with a 20-30% return. So with the ladder principle or leapfrogging, it would be likelier to wind up either investing on a monthly basis or a lump sum initial investment. If diversified, you would be selling some sets next year, but not all. So over the course of a few years you would have sets that are 2-3 years old and ready to be sold. For an explanation of laddering or leapfrogging, think of it this way: you invest $2000 each year from 2012 through 2017. When sets hit your magical number, you sell them and reinvest. Some sets will hit your goal quicker than others. Some years it might actually be difficult to find quality sets to buy. Obviously, the main goal is to wind up with more than you started with. The sets you bought in 2012 would be planned on reselling in 2015. Sets bought in 2013 resold in 2016 and so on. After a certain point, you shouldn't have to put any new money into your inventory. So what is the best route to take? Do you aim for a lower margin of 8-10%, but try for high volume of sales, I could see that adding up rather quickly. But taxes would eat into it. And if you're selling retired sets, it could be a long time waiting for the rest of your inventory to retire. Do you have a certain percentage such as 25% for everything? I can see that working since it could be easier for a set to go from MSRP to 125% than for a set to go from 125% to 150% of original MSRP. Throw in a discounted or sale purchase price and that margin is much easier to reach. Also, it's much easier to compete on Ebay since not everyone purchased at the same cost. Some miss out on sales that you capitalized on. Buy a set at 25% off and that set doesn't need to increase much for you to hit your target. Do you just wait until your $100 set hits $150 or $200 on Ebay, then you sell and not bother worrying about what percent your profit it--you just know you did well? To me, and others I would think, it's the million dollar