How to Invest in Guitars

Vintage guitars are definitely cool. There’s nothing more awesome than coming up on an old Gibson or Fender. If you can get a hold of a classic axe and flip it for a big profit, rinse, wash, and repeat, well that’s even cooler. But the question is, are investment grade guitars really a good investment? Here are some things you should be aware of before you take the plunge into the speculative world of vintage guitar investment.

Volatility

As with all investments, the idea is to always by low and sell high. Over the last twenty or so years, the investment guitar market has really expanded, becoming an area where a skilled (or lucky) speculator can really make a lot of money. There are so many different types of guitars made popular by groups and artists from the Beatles, Jimi Hendrix, the Rolling Stones, to B.B. King, Led Zeppelin, Prince, and on and on it goes…as the legacy of these great artists continue to grow, so too has the interest in guitars of their eras.

However, if you look at when the market for collectable guitars really started to grow it was during a time when the economy and the stock market were both fairly vigorous. If you bought and sold guitars during the 90’s and the early 2000’s you probably did pretty well. Once the great recession hit if you were still holding a bunch of collectable guitars that you had bought for 2007 prices in 2008, well, you took a heavy loss.

As with most collectibles, the value of vintage guitars is highly subjective, and is going to shoot up and down depending on the disposable income of collectors at any given time. With the economy having rebounded a bit these days, prices are likely to begin to rise again as well.

It may be a good time to start making some good buys in anticipation of overall demand heading back up. But you want to be very careful when pulling the trigger on an expensive buy. If you do, you need to know with some certainty exactly how and who you are likely to sell it to, or else be comfortable holding on to it for yourself in case the market takes another dive.

Buying Smart

When you do decide to buy you’ll want to know what your options are generally going to look like in terms of the type of sellers that are out there, and what things you should be on the lookout for when it comes to getting a piece in good condition for the best possible price.

If you head to a website like Reverb.com you’ll see a wide range of different sellers. That is including well established stores as well as private buyers who just happened to dig an old fender out of their father’s attic and don’t really know what to do with it.

When deciding from whom to buy, it’s not altogether much different than deciding whether not to buy used from a private owner or to buy pre-owned from a dealership. There is a little bit more guarantee when it comes to the quality or condition of your axe when you buy from a store, in part because they should be experts and also because they usually have a return or repair policy in place if something does happen to be wrong with it. The other side of that, of course, is that the same guitar is probably going to cost a little more coming from a store than from a private hand.

Originality

Finally, you want to know whether or not the parts on the guitar that you are buying are all original, and if not, what is original and what is not. Why is that? Well, because collectors overwhelmingly favor buying original pieces.

So you might have two Gibson guitars that you can buy, say they are both the same model, and one is in excellent condition while the other needs repair. If the one that needs repair is all original, well you may need to either fix it or sell it for less to a buyer who will, but it still may be a better buy than the one that works like new if it has been modified or replaced with new parts.

A blonde Gibson from the late 50’s would have its resale value plummet, for instance, if it were painted. The originals were unpainted because they used a high quality wood with a distinctive color.

That’s the point of “vintage” after all; that it should be unchanged. But don’t expect things to stay unchanged when it comes to the market for investment grade guitars.

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Elizabeth Goldman is the editor of AlternativeInvestmentCoach.com. She has written for Investing.com, Bullbearings.com and many others.