Why Investing In Guitars Beats Investing In Property

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Forget brick-and-mortar houses. Skip your S&P 500 shares. Today’s choicest investments could be made of spruce, mahogany, and 6 steel strings.

Guitars are better investments than property, said memorabilia expert Ted Owen, CEO of memorabilia auction house The Fame Bureau in 2007. It’s an opinion that seems to hold true till this day. In 2022, a woman in the UK was astonished to find out that her father’s old Gibson Les Paul sunburst guitar that he’d bought for just £50 in 1967 was now worth more than a house. The guitar hadn’t seen the light of day since the early 1970s when her father chucked it into a cupboard and never touched it again. 

Vintage and rare guitar experts ATB Guitar inspected the instrument and diagnosed it as “absolutely filthy” (the sunburst guitar has since been nicknamed “Dirty Burst”) and in “the worst” condition. They were pretty sure it would sound terrible—if it could even be played. Despite all that, it was sold to American musician Joe Bonamassa for a sum between £150,000 and £200,000. That’s an average annualised return of up to 16%—much higher than that for property or stocks.

So, should you invest in a Fender instead of a flat? Is a vintage guitar a better investment than a new condo? I decided to investigate by tracking down a local guitar expert. Dino Yong is the owner of local music shop Heirlooms Music, which specialises in vintage and boutique acoustic guitars. I paid him a visit at Lichfield Road to learn all about the strings attached to investing in guitars and why it’s better than investing in property.

 

Why Investing In Guitars Beats Investing In Property

  1. Your Fender could have a higher ROI than your flat.
  2. The most “ownable” investment
  3. Soaring guitar prices—what’s COVID-19 got to do with it?
  4. Should I buy modern guitars from artist tie-up collections?
  5. Aim to make music, not just money.
  6. Keep guitar collecting meaningful to you.
  7. This is going to be your favourite guitar.

 

1. Your Fender could have a higher ROI than your flat.

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Dino Yong, Heirlooms Music

Dino Yong is the owner of guitar shop Heirlooms Music, home to a large collection of vintage and boutique guitars—we’re talking hundreds. But before Heirlooms Music, Dino owned an architectural and interior setup, investing in buildings and buying old houses on a small scale on the side in the mid-2000s or so. When things started to get more expensive, Dino began looking into other types of investments that could make money.

He then dabbled in the world of yachts and boats. The idea paints an image of luxury of leisure, but the truth is that this brought with it a lot of upkeep and mooring charges to bring the ship back to Singapore. That’s when Dino met a Japanese businessman who changed his life.

This investor was a large guitar collector. He told Dino something intriguing: There were guitars he’d purchased in the early 80s for $20,000 that he’d recently sold for $350,000 to $400,000 in the mid- or early-2000s. “It’s literally more than a 10-fold increase!” Dino exclaims to me. If you’re wondering, that’s an average annualised return of 15% to 16%. Furthermore, some wealth funds that invest in violins and other instruments were doing better than the businessman’s S&P 500 shares.

The numbers don’t lie. For example, a sunburst 1959 Gibson Les Paul Standard bought for just over 60 USD (S$80) back in the day was fetching up to 313,700 USD (S$420,700) by the late 2000s. That’s an approximately 19.4% average annualised return on the holy grail Les Paul Standard.

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Image: Guitar Point

To put things into perspective, the median return on US real estate is 8.6% annually, while the average annualised return on property in Singapore is 5%. Think the stock market could give this guitar a run for its money? Nope. Even hugely influential ETFs like the S&P 500 don’t come close, with an average annualised return of 10.13% from its inception till end-2022. 

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“So the Japanese businessman asked me, why don’t you look at some of the more entry-level guitars like Gibsons and Martins?” Dino says. And so Dino’s investment guitar journey began.

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2. The most “ownable” investment

The investor told Dino that instruments like guitars were easier to “own”—to own the item, hold it, and take care of it. For example, purchasing a house in America for investment and getting your hands on the title deed could still mean they are in a dilapidated state. You can’t really fly over just to take care of it. “And a boat is also just like a big piece of real estate,” Dino explains. 

“But with a guitar, you can literally just put it in your backpack. You own the whole asset and the investment,” Dino says. “I thought the portability and utility value of playing a nice instrument, coupled with the incentive of making a bit of money from it as an investing tool, just made sense.”

It does make sense. When I wanted to learn some kind of musical instrument as a teenager, I remember choosing the guitar over the piano because I didn’t want to deal with an instrument that was bigger than me. While teenage me never considered the investment value of my instrument, the financially literate adult in me now can appreciate what Dino is saying. It sounds almost like a dream come true, where passion meets investment.

Portability aside, being able to hold your asset in your hands comes with some practical uses too. When you gaze your eyes upon your investment-grade guitar, you know that no bank error or internet outage is going to get between you and your investment. Your guitar can’t be embezzled or become a victim of cyber scams. Nope, the asset is yours to own safely and securely, and is immune to human incompetence, machine error, and fraud.

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3. Soaring guitar prices—what’s COVID-19 got to do with it?

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Image: KMazur / Getty Images / Julien’s / Guitar.com

Kurt Cobain’s left-handed Skystang I guitar sold for US$1.5 million last month at auction. It was the last guitar that Cobain played publicly before the legendary Nirvana frontman took his life in 1994.

But believe it or not, that guitar is only the 9th most expensive guitar ever sold. The number one spot is also owned by Cobain—his Martin D-18E, the guitar he used in Nirvana’s universally lauded MTV Unplugged session. Cobain purchased it for $5,000 in 1992, and it sold for a staggering $6,010,000 in 2020 to Peter Freedman, the man behind Rode Microphones.

How did this humble-looking acoustic guitar fetch a price that was almost 4 times that of the guitar Cobain used during his last ever public performance? You’ll never guess: COVID-19.

Guitar World writes: “In summer 2020, there wasn’t much to do apart from play guitar and bid on online auctions, which might be why Kurt’s guitar so comprehensively smashed all records.”. This story sounds familiar. It seems to be a trend across many industries; I’ve also heard it said about why luxury watch prices soared during the global pandemic.

Dino echoed the sentiment: “We see an explosion of people heading towards other commodities when times are bad. “Pre-COVID, there was probably less interest in vintage guitars and investment-grade instruments. Post-COVID, surprisingly, we saw a huge uptake.”.

Dino explains that this could be because of an increase in investment appetite due to influence from places like America and Japan. These locals have more mature instrument markets as people explore alternative investments like vintage instruments. Vintage guitar prices in Japan have soared both during and after the pandemic—some by as much as 50% from one month to the next, according to Japanese music store chain Mikigakki. For example:

  • A 1950 Gibson J-45 (popularised by Elvis Presley and Bob Dylan) fetched about 1.4 million yen (S$12,960) in 2022. That’s an increase of 40% from 2021, and an almost doubled value since 2019.
  • A 1960 Martin D-28 (popularised by Johnny Cash and Neil Young) was selling for about 1.6 million yen (S$14,800) in 2022. That’s up by more than 20% from 2021 and over30% from 2019.
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Image: Nikkei Asia

It’s a strange phenomenon—instead of exchanging their old guitars for swanky new ones, guitar hobbyists these days are exchanging their new guitars for old, vintage pieces. According to Mikigakki, in Japan, these folks tend to be in their 40s or older, with many collecting vintage guitars in their retirement years with more money to spend.

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4. Should I buy modern guitars from artist tie-up collections?

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Images: Martin Guitar, Fuel Rocks

 ZZ Top frontman Billy Gibbons says as far as investments go, guitars are a good place to start. “It doesn’t have to be something that’s 50 years old these days,” the rockstar says. “Don’t turn your back on it just because it’s new.”

Don’t forget that today’s vintage instruments were once new, modern instruments in their own time. Over the years, the most valuable guitars have emerged as vintage collectibles. And when we talk about collectible modern guitars, artist tie-ups quickly come to mind.

Ed Sheeran, Shawn Mendes, and John Mayer are just some musicians in recent years who have collaborated with guitar manufacturers to produce their own signature series. These are guitars that are marked as special Sheeran/Mendes/Mayer editions; for example, Sheeran’s guitars come with his trademark mathematics symbols, like an “X” sign on the guitar’s body. 

As you might expect, such Martin x Ed Sheeran guitars cost more than your regular Martins (which for a beginner guitarist, is not exactly a beginner-level brand anyway). That said, Sheeran‘s guitars have something the regular guitars don’t: collectability. These guitars are limited-edition, and this increases their longevity and perceived value beyond that for just die-hard fans of Mayer, Sheeran, and Mendes. As Dino noted, interest in these models and their resale value remains robust even for years after their release.

But as someone who plays guitar, I had to wonder: Are these models really any different from regular guitars from the same guitar brand? 

“It’s open knowledge that the Martin LX1E is almost identical to Ed Sheeran’s X Signature Edition,” Dino chuckles. “Those who can’t afford Sheeran’s guitars can probably get the alternative, which is a few hundred dollars cheaper.”

So if you want to own a collectible but can’t afford a guitar your favourite artist has owned before, opting for artists’ signature guitars is a good option. But if you just want to strum your guitar and belt out Ed Sheeran songs in your bedroom, get a regular Martin LX1E. You lose the “X” on the guitar body but save a few hundred dollars.

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5. Aim to make music, not just money.

At the heart of it, a guitar is an instrument to be played, not money to be made. Dino said at the start of our session that guitars are great because they have value both as investment tools and instruments you can jam with. So, if you can’t make money, you can at least make music. For this reason, I believe that you should only invest in a guitar you like playing.

“There’s a saying: Don’t get something that you would feel afraid to play on stage or to bring it out. If you have an instrument that is so precious to you that you don’t dare to really use it, then you’re not going to enjoy the instrument,” Dino says.

He advises guitar hobbyists to choose a guitar that’s within their budget (of course) but also within their expectations. There’s no such thing as the best guitar, but there is the best guitar for you.

“For example, we have a guitar associated with Robert Johnson that’s probably not worth much—the sound that it produces is so twangy and broken,” Dino chuckles. “But it works for Delta blues and Mississippi blues, those kinds of sounds. For that kind of music, it just works.”

Dino reminds me that sound is subjective. Twangy and broken to you could be the perfect sound for someone else. 

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6. Keep guitar collecting meaningful to you.

From a purely collector’s standpoint, there’s no clear right or wrong about guitar collecting, but you should do it in a way that suits you.

For example, traditionalists would go for Martin guitars because they have more limited models, but these are well-controlled. Most of their guitars come with serial numbers that you can look up in a registry, allowing you to trace the history behind the guitar.

Comparatively, brands like Gibson don’t have such lineage or traceability. “There are cases where guitars from the earlier times, even like the 70s or 60s, had discrepancies. The QC was not always fantastic,” Dino admits. 

However, what Gibson does have is variety. Gibson has lots of very different models with a wider range than the traditional Martins. “As a collector, it’s very fun!” Dino tells me. This is coming from the same person who told me: “I’m a Martin guy.”.

“Gibson prices are not as expensive as Martin prices. So to be honest, personally I have got more vintage Gibsons than Martins,” Dino continues. That also means that Gibsons are unlikely to appreciate as much as Martin guitars. But once again, I encourage you to like the guitar(s) you buy. Buy a guitar that you feel an emotional connection to, be it from its sound, look, or story.

There’s one Gibson guitar that fascinates me. It’s a 1942 vintage Gibson J-45 ($22,000) that has a very special claim to fame: It was built by women during WW2. These Gibson “Banner” guitars are called such because of a banner on their headstocks that exclaims proudly: “Only Gibson is good enough”. These particular banners appeared on Gibson guitars only from 1942 to 1945, and are a clear signal that that guitar was made by the hands of a woman.

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A 1942 Gibson J-45, also known simply as a Banner Guitar for the “Only a Gibson is good enough” banner on the headstock ($22,000)

There’s a whole book on these rare Gibson guitars by John Thomas (called Kalamazoo Gals: A Story of the Extraordinary Women and Gibson’s ‘Banner’ Guitars of WWII), but here is Dino’s summary:

“The story goes there was a war going on, and everything was scarce—including manpower. While the men were out at war, the women, girlfriends, wives, and daughters all came to the Gibson factory and helped to make some of the best guitars that Gibson has ever produced.” Dino says, with a touch of pride.

Why were these guitars special? The author of the book, John Thomas, went about this in a very scientific manner—he X-rayed Gibson guitars before, during, and after the war. He concluded that the guitars made by women were more refined, with every little part of the instrument sanded a bit more and smoothened with more care. That’s the difference in sound people hear today. Hear it for yourself:

One guitar enthusiast wrote on The Acoustic Guitar Forum:

“There is one thing about Banners that you cannot put a price tag on—no guitar out there speaks as eloquently to a specific time and place as they do. […] You do not feel it is as much that you own one, as you have been appointed its caretaker.”

The Gibson Banner guitar belies a wonderful story of strength, social justice, and female empowerment. The weirdest thing to me is that Gibson continues to deny or refuses to acknowledge that women made these guitars to this day. Mysteries continue to shroud these beautiful Banner guitars, which to me only makes them more captivating.

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7. This is going to be your favourite guitar.

The last question I asked Dino was a personal one: What’s your favourite guitar?

“Hmm…I guess the one that can sell for the most money!” Dino laughs.

Jokes aside, it turns out that his favourite guitar is nowhere near the likes of that 6 or 7-figure Elvis guitar he has stashed away somewhere. It’s an old, humble Takamine guitar that they use in their shop for worship.

“Everybody uses it. The pickup’s not working, but the action is always good. As with the typical Japanese guitar, this guitar has got a cloudy look, it’s got this haze,” Dino says fondly. “It’s nothing spectacular. But it plays well and everybody likes it.”

I’ve interviewed a Barbie doll collector, a typewriter collector, and a luxury watch collector. Most of the time when I pose this question of what their favourite item is, they point to an old, worn-out thing that has plenty of flaws and scars—as well as memories. The favourite is always simply the one that is used the most.

“It’s a funny thing about human beings,” Dino agrees. “We subscribe sometimes to the belief that the item we value the most is the one we think has the greatest perceived value. But I guess it’s actually the one that you gravitate towards the most. That’s the one.”

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My chat with Dino continuesA Beginner’s Guide to Investing in Guitars: Vintage Guitars, Boutique Guitars, and More

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