TIE #025: The Art of Compounding (How to Make Money Faster)

99.9% don't understand how powerful this concept is

Apparently you hate money. If you didn’t, you’d be using Rakuten every time you shop on websites like Walmart and Target to save money.

They have paid me over $8,000 for things I was already going to buy for my one-person business (click here for proof).

They are also the reason this post is free to read. Sign up here and get $40 for free after your first use.

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You must understand the concept of compounding if you are going play the online business game and the LEGO investing game.

Compounding will allow you to replace the income from your 9-5 job and propel you to towards financial freedom if you embrace it.

If you do not understand it, read this post of mine and come back here when you’re done:

TIE #007: The Secret to Turning $1,000 into $100,000

Now that you’re aware of it’s power, let me show you how it applies to LEGO investing:

Amazon ROI after selling fees (2022)

Above is data I hand compiled from almost all LEGO sets that retired in 2022, roughly 5-6 months after each set retired.

What this tells you is LEGO sets under $40 MSRP are underperforming the average, while sets over $100 are overperforming.

This is expected and happens every year. Why? Expensive sets appreciate sooner.

Cheaper sets eventually outperform more expensive sets, but it takes ~18 months for that to happen.

Here are the same numbers from LEGO sets that retired in 2021 that confirms this to be the case:

Amazon ROI after selling fees (2021)

If your capital is limited, you need to recognize this characteristic.

To explain how important this is, I’m going to give you a hypothetical situation.

Let’s pretend that back in 2022, two new investors named Timmy and Chad decided to start LEGO investing at the exact same time with $5,000 each.

Timmy doesn’t understand compounding and decided to put all of his capital evenly into sets priced below $40.

Chad understands compounding and decided to put all of his capital evenly into sets priced above $100.

Let’s pretend that Timmy’s portfolio appreciates by 27% during the 2023 holiday season, while Chad’s appreciates by 50% (all I did was extrapolate from the 2022 numbers above).

Here is how much each investor would have had in portfolio value:

• Timmy: $6,350

• Chad: $7,500

As you can see, Chad is winning at this point in time. What does Chad do? He cashes in his investments in preparation to start buying 2023 retiring sets.

Chad then puts that $7,500 into LEGO sets with an MSRP above $100, just like before.

His portfolio value by the end of 2023 (if it was 50% appreciation again) would be $11,250 after two years of investing.

Timmy has two options on his journey:

1. Do what Chad did, but with sub $40 sets again

2. Hold onto the original $40 sets for two years, then cash out

Here are what his portfolio value would look like:

• Scenario 1: $8,065

• Scenario 2: $10,000

In both situations, Chad wins.

I want you to recognize something though. The investment returns for both Timmy and Chad are great here from an investment perspective.

They blow the stock market out of the water but the amount of money made over that period is not impressive.

The key takeaway: It took Chad two years to make $6,250. TWO YEARS.

This is because he only compounded twice (once in 2022 and once in 2023).

Perhaps you now understand why I recommend starting an efficient Amazon business first and then a LEGO investing business second.

Chad would be much better off starting an Amazon business, scaling it to $5-20k/month in profit, and starting LEGO investing with $100,000 in capital instead.

Then, his two year LEGO investing profits would have been $125,000.

Sounds a little bit better doesn’t it?

If I was starting over today I would do this:

Start a simple Amazon business, scale it, invest the profits into LEGOs (later on), and buy my freedom with dedicated effort.

As always, the choice is yours.

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When you are ready, there are two different ways I can help you:

1. If you are interested in starting an efficient one-person online business, I recommend starting with one of the following:

   1. Textbook Flipping Mastery - My in-depth guide on how to start a high-margin Amazon e-commerce business.

   2. LEGO Investing Mastery - My in-depth guide on how to start a long-term “buy, hold, and sell” LEGO investing business.

   3. The Conference Room - My private mentorship community that includes the two guides above, for free. Pay once and stay a member for life.

2. If you are interested following along with my personal LEGO investment portfolio and getting exclusive alerts when I add a new set to that portfolio:

   1. Become a paid subscriber here (7-day free trial available)