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How to Invest in Vintage Guitars

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Recently, the world was shocked to learn that famed guitar company Gibson was facing bankruptcy.

It felt like the end of an era for the music giant.

What went wrong?

Basically, Gibson was assessed to not be able to pay back the several bonds it owed.

Over the years, Gibson tried to expand by acquiring other companies.

A good tactic on its face!

But in the process of acquiring a DJ company, an audio technology company, an electronics company and others, Gibson seemed to forget what made them famous:

Guitars.

Gibson brought the world so many famous guitars, including the famous Gibson Les Paul.

(My first guitar was a Gibson. I received it as a gift on my 10th birthday.)

They helped to create the rich landscape of vintage guitars that exists today.

Even though their company isn’t in the best shape, that doesn’t mean you can’t venture into the world of vintage guitars.

There are enough players in the game that collectors can find some gems!

Consider why you want to invest in vintage guitars.

There are lots of markets if you’re looking to invest in vintage goods. Why guitars?

There’s no wrong answer to this question, but it bears asking.

If you’re a music fan, you may want to collect the instruments associated with your idols.

I know that if I had the opportunity to acquire a guitar owned by Charlotte Caffey or Jane Wiedlin of the Go-Go’s, I’d do it in a heartbeat!

Yes, that’s me with the Go-Go’s!

But you have to be okay with the possibility that you may never play that instrument.

If you’re looking to invest in vintage guitars as historical preservation, you’ll have a much more streamlined path ahead of you than someone who’s strictly a hobbyist.

Consider picking a time period (i.e. the pre-Beatles 1950s) or a specific style (i.e. vintage six-strings) so you can set yourself up as an authority on those subjects.

That will help your future sale chances. Unless, of course, you have enough resources to jump on any good investment you come across.

Investing in musical instruments is most similar to investing in fine art.

The market for vintage guitars is notoriously volatile. Before the Recession hit, guitars from the 1950s could fetch up to $350,000.

But today, that price is unheard of.

Fine art and vintage instruments are both highly subjective markets.

It’s all about how much people will pay for the guitars.

That can change according to new guitar models entering the market, musicians falling in or out of favor, and many other factors that people may not have even considered.

It’s a market that runs on sentiment.

If you’re looking to invest seriously in vintage guitars, accept that you will likely spend a long time watching the market for vintage instrument buyers.

It can grow to be a real chore!

But if you’re lurking around forums anyway, why not?

Don’t let vintage guitars bleed your wallet dry!

Musical instruments are also not like fine art in that they do require upkeep and maintenance.

You may need to have parts of the instrument specifically repaired or replaced to make a future profit.

A vintage guitar doesn’t have to be perfectly pretty. But it shouldn’t be blown to pieces.

As with most material investments, protecting and preserving the object itself can have unforeseen costs.

George Gruhn and Walter Carter of Gruhn Guitars provided an excellent list of expenses in one of their 2006 newsletters, which we will quote below:

  • Insurance:4 to 0.5 percent per year (40-50 cents per $100 of value).
  • Storage: instruments need a room with proper climate control and a good security system.
  • Maintenance: Even if an instrument is never played during the period of ownership, it will still require cleanup, new strings and setup before it is sold.
  • “Brokerage” commission: Expect to pay 10-25 percent to a dealer or even more to an auction house (if you factor in the buyer’s premium) to sell your instrument. eBay would be cheaper, but would also require time and effort. There’s no guitar equivalent to the stock trader’s mouse-click and $7 transaction fee.

Impressive, huh?

As we’ve mentioned in previous blog entries, make sure to research a market before entering. Cutting a collection short before reaching a full return is never fun.

Research your vintage collecting market.

Research your neighborhood and surrounding areas to see if there are instrument supply shops and/or mechanics specializing in restoration.

They should be within a reasonable distance of where you store the instrument, in case you need to move something delicately.

Historical preservation societies may be able to help you locate a specialist.

You may also find a referral from a collector of different vintage items, such as cars or pinball machines. Collectors tend to help each other out.

Collecting vintage guitars can be a fun and lucrative investment strategy. But you have to be okay with the possibility that your investment may not pay a great return. Pre-Recession guitar prices may never return. But own a piece of history? That rocks!

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