Guitars as an Investment: How to “Pick” a Winner

Musical instruments are popular alternative investments, but a guitar is a lot more conveniently stored than a piano or a tuba 

An investment guitar is often a long-hold asset, but one that can be enjoyed and bring pleasure while it appreciates. Anas Riad/Shutterstock

Alternative investment come in many forms, anything from stamps and watches to coins and cases of wine. Now add musical instruments, specifically guitars, to the list.

There’s Money in Music

The origins of the acoustic and electric guitar is debated, but likely can be traced back to the guitarra latina (Spanish guitar) and the guitarra morisca (Moorish guitar), which themselves may have been inspired by the medieval lutes and four-stringed ouds. Regardless of their origin, guitars now vie with pianos for the most popular musical instrument, with 40 percent for each worldwide. This creates a market, albeit small, for historic and rare guitars—and, as such, an opportunity for investors.

The late Kurt Cobain’s 1959 Martin D-18E sold for $6 million at auction. DANIEL LEAL/Getty Images

At present, the world’s most expensive guitar is the late Kurt Cobain’s 1959 Martin D-18E, going for $6 million at auction in 2020. The chances of stumbling across a guitar with the provenance to inspire a similar price are beyond slim, but based on either a many years-long hold of a model showing strong value-increase potential, or discovering Eric Clapton’s long-lost, stolen “Beano” ‘59/’60 Gibson Les Paul Standard at a garage sale for $50, money can be made. As a Plan B, if you don’t end up making a fortune on your investment guitar, at least you can play it; when he was a teenager, Cheap Trick’s Rick Nielsen was a vintage guitar broker who kept his inventory in perfect tune.

The Lute from Medieval times, was one of the first stringed instruments. metmuseum.org

As is the case for all alternative investments, the most important things to keep in mind with guitars is that, firstly, certain models inspire passion that drives prices to incredible levels; secondly, values can rise and fall unpredictably; and, thirdly, in order to realize a profit, a seller must find a buyer willing and able to purchase it. The business model calls for sales to collectors by means of private transactions or auction. Sales to retailers will be, at best, at wholesale prices—which is to say 50 percent or less of market value.

Even older than Lutes, Ouds are said to have their origins in Persia 3,500 years ago. daphnusia images/Shutterstock

For most investors, a reasonable goal is to develop a plan of what type and/or model guitar to buy, while also being ready to toss that plan out the window if an amazing deal on another guitar presents itself. It’s difficult to get overly excited by a rare coin or stamp, but unique guitars are tantalizing objects which can become almost living things in the hands of a skilled player, allowing the artist to express him or herself in a way that touches others. No coin, bearer bond, or stock certificate can do that.

The Guitara Morisca was inspired by ouds, leading to modern guitars. neftali/Shutterstock

Choosing Your Guitar

So how does one choose an investment guitar? Rarity is a plus for almost any investment, such as limited editions, while unusual features or an interesting provenance can also greatly affect the value of a guitar. Some collectors focus on a specific type, while others focus on specific manufacturers and models such as acoustic or electric guitars—not unlike those who invest in cars or motorcycles but only look at first-generation Ford Mustangs or Harley-Davidson Panheads.

Acquiring investment guitars requires a wealth of specialized knowledge about the materials used to make them. metmuseum.org

All things being equal, Fender electric guitars and Gibson acoustic guitars from the 1950s and 1960s tend to be very collectible. To verify value, do an online search of similar models to see, not what they are listed for, but their actual sale prices. Many retailers, including Guitar Center, sell pre-owned guitars, some of which qualify as vintage, so be careful when buying to ensure there is sufficient margin for a profit when it comes time to sell it.

When considering a vintage guitar as a potential acquisition, carefully inspect all components and parts to guarantee authenticity. Peter Gudella/Shutterstock

Others look for guitars with certifiable celebrity-owned provenance. In 1975, Barbara Mintz and Arlan Ettinger founded Guernsey’s. This auction house specializes in unique items, including the contents of the ocean liner SS United States, after which it directed its attention to celebrity-associated rock & roll items. Guernsey’s recent guitar auctions have included Bob Dylan’s 1962 Fender Stratocaster, an acoustic 1990 Alvarez-Yairi guitar played by Jerry Garcia, and many more owned and /or played by celebrities.In 1999, Eric Clapton auctioned 100 of his guitars to raise money for charity; his 1956 sunburst Fender Stratocaster, named Brownie, sold for $497,500—significantly more than similar vintage Sunbursts.

A great thing about collecting vintage guitars as investments is that you can play them. Third Eye Images/Getty Images

The most important takeaway from these examples is that the guitars owned and/or played by celebrities all had certifiable provenances. Even a brief viewing of the TV show “Pawn Stars” reveals that many so-called celebrity guitars are actually fakes or have histories that cannot be documented, resulting in much lower valuations. If you come across a guitar which the seller swears was owned by Prince, Elvis, or any other music superstar, have it appraised by an expert before you hand over the cash. There are shops that specialize in refinishing and replacing parts of guitars to give them a worn and much older appearance, so having an expert carefully examine the guitar and any photos or other evidence of its previous owners is a worthwhile business expense.

Enjoy the hunt for musical treasure!