Yes, that guitar your parents passed on to you could be something really valuable. Before you sell it down at the pawn shop -- or consider buying another old guitar as an investment -- understand the ups and downs of the market for collectable vintage guitars.

The adult world of investment requires lots of study, discipline and patience. But does it rock?

Though I avoid absolutes when it comes to investing, I declare this without fear of error: No stock, bond or title ranks as cool as an investment you can plug into a Marshall amp and turn up to 11. Vintage guitars have become a hot commodity among collectors over the last two decades.

But the question remains: Is it a good time to get into the market?

Big rewards, but big risks

That depends on whom you ask. Like any other collectible (fine art is a good example), vintage guitar values play by a rulebook that’s highly subjective, and that you have to study close to understand. In that way, vintage guitars might more closely resemble foreign exchange (forex), where a few simple hunches could reap huge rewards — or get you in huge trouble. There’s no substitute in this case for talking to experts, learning the market and taking calculated risks based not so much on what’s already sky high, but what stands a chance of rising in the future.

And just like everything else touched by the Great Recession, vintage guitars took a big hit. Prices for prized instruments soared in the early 200os as speculators jumped in, then the market plummeted by as much as 30 percent by the end of the decade.

Wayne Sefton, who runs Midwest Buy and Sell in Chicago, is one of the area’s top vintage dealers. He counts the members of Wilco among his happy customers, and he maintains that vintage guitars look ready to rock again, so long as you pick your investments carefully.

“The question is, how much will prices go back up?” he says. “Some people are holding on to their old [pre-recession] pricing, and they’re never going to sell those guitars. But it is a good time to buy, and you can find nice items.”

Finding valuable guitars

Now, time for a primer: A vintage guitar, generally speaking, is one made in the 1980s or earlier. American Gibson and Fender guitars from the 1950s and 1960s are among the most valuable, though vintage Rickenbackers (favored by The Beatles, The Byrds and Tom Petty) have made big strides in recent years. On the acoustic side, Martin, Gibson and Guild rank as highly prized brands.

So yes, that guitar your parents passed on to you could be something really valuable. And don’t worry if it’s beaten up: Some Baby Boomers pay thousands of dollars on brand-new guitars that are pre-fab relics, beaten up to look like they’ve been dragged around a smoky bar for 40 years.

But if the stock market represents one level of volatility, vintage guitars rank right up there with a 100-story, sheer-drop roller coaster.

Some examples of a collectable guitar’s highs and lows

To illustrate the wild ride of the last 10 years, let’s look at a particular prize: a 1956 Gibson Les Paul “Gold Top” (so named for its metallic-champagne color), stocked with P90 pickups, a Tune-o-matic bridge and a stop tailpiece. In 2002, George Gruhn of Gruhn Guitars in Nashville, Tennessee, could get $5,500 for that axe. By the end of 2006, the Gold Top’s value had skyrocketed to $85,000. “Then they plunged down to $30,000, and a nice one today is worth $35,000,” Gruhn says. (That’s a big short-term loss, but new, that guitar probably sold for about $400.)

So if you’re thinking of getting in, consider first of all whether you’re passionate about guitars, as a player or music fan. If you are, that passion should feed your desire to know the market inside and out.

Then, take a look at the guitars Sefton says are holding their own right now, and stand a good chance of going up in value. These include 1970s Fender Precision basses (about $2,000) and Rickenbacker guitars from the 1980s onward (usually about $1,500-$2,500). Let’s not forget amplifiers, too. Sefton is a big fan of Fender amps made before 1966, and known as “blackface” for the color of the front control panel. He’s still fetching good money for Fender Champs, Princetons and Deluxes, small amps that are easy to carry and care for, and sound great even at low volumes.

The Princeton in particular is a favorite of Eric Clapton, who some say started the whole vintage guitar boom. In 1999, he auctioned 100 of his guitars to benefit his Crossroads Centre, a charity he founded to help people affected by drug and alcohol abuse. The date was June 24, and by vintage guitar market standards it was the equivalent of the British Invasion: His 1956 Fender Stratocaster Sunburst known as “Brownie” fetched an astounding $450,000.

Never had a guitar sold for so much money, and it started a musical equivalent of the Dutch Tulip Craze. Suddenly, investors and speculators entered the market, driving up the prices of the most mundane instruments as they traded with the fury of junk bond dealers.

Things are more sane today, and while Sefton and other dealers miss those days of insane pricing, it’s good news for anyone who hopes to start a vintage guitar collection as an investment and a store of value. Just be careful, he says, and plan on holding onto an instrument for at least a decade before you see stable, sizable growth.

Look at it this way: The worst that could happen is that you wind up with a closet or basement full of really cool guitars. And if the market recovers to anything like the previous decade, returns of 30 to 300 percent are entirely feasible.

And while you could go out and blow $35,000 on an old Les Paul, “Stay under $5,000 for a guitar,” Sefton says. “Anything under that is a nice buy.”

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About the author

Total Articles: 33
Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with, and a former managing editor at AOL's Contact him with story ideas for Money Under 30 at [email protected], or follow him via LinkedIn and Twitter (@LouCarlozo63).