There are plenty of weird and wonderful ways to invest your hard-earned cash, but is it possible to make money from musical instruments? Here, Justin Harper reports on whether or not splashing out on a Stradivarius or a six-string Strat makes sound financial sense.
Investing in pop star memorabilia and musical instruments
You’ll often read about a music fan who has unearthed a Jimi Hendrix guitar in his attic or a John Lennon piano in the garage and then auctioned it off for millions of dollars.
When considering how to make money from musical instruments, these high-profile cases are rare. Yet there are still opportunities. You could go on the hunt for a piece of pop star memorabilia, for example, though there’s a good chance the seller already knows its value and will be asking a pretty penny. The other thing to consider is items already in your possession that might change in value according to circumstances. For example, a piece of memorabilia or a musical instrument tied to a certain rock star or celebrity can suddenly be much more sought after if they happen to pass away (and worth a lot more).
Emotional versus financial judgment
One of the biggest pitfalls of investing in these so-called alternative investments (which include vintage wines, art, classic cars) is mixing sound financial judgement with emotion. Just because you’re attracted to a certain piece of art, a car or an instrument, it doesn’t mean everyone else is. If you’re buying to make a profit, you need to think with the head, not the heart. This is one of the best techniques when looking at how to make money from musical instruments.
The market for vintage instruments
Another challenge is finding particular instruments that fill your bill and are within your budget. The market for vintage and collectible musical instruments is vast and diverse. It’s really a collection of smaller markets that span everything from multi-million dollar violins, cellos and violas from the 17th and 18th centuries to $300 acoustic guitars from the 20th century.
Reasons collectors buy instruments
Collectors buy musical instruments for many different reasons, and having a famous rock star owner is just one of them. They are also drawn to an instrument’s craftsmanship, rarity and age. As a hard asset, instruments can help diversify a portfolio, holding their value well while providing some downside protection. And many have the potential for significant long-term appreciation which can be a major attraction in these choppy stock markets.
Before you start searching online or heading off to your nearest music store, you need to educate yourself about musical instruments to make sure you are buying one in good condition, from a reliable source and that it is genuine. Monetising musical instruments can be a profitable venture. Auctions can be a good source of information, but prices aren’t always a good gauge of values in the broader market.
Monetising musical instruments: Violins
Violins are among the most stable investments in musical instruments. They may not be as sexy as a Fender Broadcaster or a Stratocaster, but they can be just as valuable. In the world of fine violins, certain instruments have appreciated faster than others. For example, Italian violins have appreciated far more quickly than German instruments. One of the most notable violins makers is Guarneri, regarded as second in greatness only to Antonio Stradivari. Violins made in Cremona, Italy, during the city’s golden age of violin making, around 1650 to 1750, are the most highly regarded violins among players and collectors. They are plentiful enough to have a track record, so sellers and buyers have sufficient sales records upon which to base prices.
Dealer expertise in musical instruments
Dealers rely on their eye and their knowledge of history, as well as experience in literally handling lots of instruments, to make their pricing decisions. They also use a technology called dendrochronology to date the wood used in instruments. That can identify some cases of fraud, but it can’t, on its own, protect buyers from replicas or overly restored instruments made with vintage wood.
The guitar market tends to be a little bit more fad-oriented. The market for solid-body electric guitars soared during the 1990s and early 2000s. But prices for many collectible electric guitars dropped about 30 percent during the financial crisis and haven’t really recovered. If they do, don’t expect it to be by too much, experts say.
One big factor in the price of any given guitar is how close it is to its original condition. The market for acoustic guitars is different, because people can’t mix and match parts from different guitars. At the top of the acoustic-guitar market, older Martin D-45s, which are extremely rare, sell for hundreds of thousands of dollars.
The current market for high-end musical instruments
For collectors wondering how to make money from musical instruments, even with just a few hundred dollars to invest, there’s still a thriving market. However, whether it’s high-end violins or acoustic guitars, the key to successful investing is to buy instruments that you like and understand. For one thing, you can then also have the satisfaction of playing the instruments yourself, or lending them out to other musicians.
Some of the world’s most expensive guitars:
- George Harrison and John Lennon’s 1964 Gibson SG. Sold for US$570,000. This guitar was used by the Beatles between 1966 and 1969. George Harrison used it when recording and touring for the album Revolver, and John Lennon used the same guitar during the sessions of The Beatles (‘The White Album’).
- Jimi Hendrix’s 1968 Stratocaster. This guitar was played by Jimi Hendrix at Woodstock in 1969 and was reportedly bought by Paul Allen of Microsoft in 1998 for US$2 million.
- Eric Clapton’s Gold Leaf Stratocaster. Sold for US$455,500. This guitar was ordered by Eric Clapton in 1996 around the 50th anniversary of Fender. Clapton wanted something that could hang in a museum, so the company made him a custom fender plated with 23 carat gold.
Don’t forget there are more conventional ways to invest! Read more topics on finance and managing money here.
