Violins as Alternative Investments
As of mid-2022, we continue to be inundated with news about soaring inflation and the risk of recession looming. Daily (largely click-bait) headlines on CNBC tout “Five Stocks to Beat Inflation,” “How to Prepare Your Portfolio for a Recession,” stopping just short of “These Analysts Know Where You Should Put Your Money”
Nearly all these articles share the same premise. In a world of rising inflation and looming recession, the cost of borrowing is going to rise. As a result, the two traditional avenues for individual investors look bad: stock markets will fall as companies margins are squeezed, and bond yields won’t be enough to offset inflation. As for recommendations, there are three common options. A first group of articles suggest finding high-yield dividend stocks (the so-called “dividend aristocrats”); these might not beat inflation, but they stand a good chance of keeping apace especially if there is a recession. A second school of thought is to put your money in real estate; the story goes that real estate is unique as it is income generating and scarce in supply so it can appreciate even alongside inflation, and it stands up well in a recession (so long as you believe it will be mild and that we are not in a “housing bubble”).
The third and last category of recommendations is, well, anything “alternative.” This is frankly not a useful term. It appears to encompass everything from notoriously volatile assets such as oil and cryptocurrency, to fine wines and collectible jewelry.
In the last several years, there has been a proliferation of new online platforms for investing in such alternatives. Readers who have dabbled in crypto will be familiar with coinbase.com and ftx.com. And those searching for alternative assets have probably found yieldstreet.com as a way to access various financial instruments and private equity, and perhaps masterworks.io (fine art). You can even buy shares of race cars and watches on rallyrd.com, and cases of wine (which you can drink, should you choose!) via vinovest.com. These investments each have such wildly different characteristics they do not belong in the same category.
Shares of paintings can’t be hung on the wall, and wine that is enjoyed loses all value. Whereas a violin, when played, actually bestows value on all parties - the musician, the audience, and the investor.
Where do violins, violas and cellos fit into all of this? We at Strumenti.com are often asked how should an investor think about this most unusual “asset class?”
At first blush, fine and rare stringed instruments seem a lot like paintings and wine. They are associated with art and culture and typically sold by brokers or at auctions. But that’s about where the similarity ends. Shares of paintings can’t be hung on the wall, and a wine that is enjoyed loses all value. Whereas a violin, when played, actually bestows value on all parties - the audience, the musician, and the investor.
The audience will notice that a fine violin will sound more vibrant and expressive, and it will project more clearly throughout the hall. The musician will benefit not just from the inherent sound of the instrument but also from the improved playability, especially when matched for the musicians’ style. Time and again, the right instrument has been shown to positively impact a musician’s career. And the investor in the instrument will appreciate how the musician’s reputation can enhance the value of a fine instrument. There are many examples of how a famous player became so associated with an instrument that it became named after the musician - e.g. the 1733 Guarneri 'del Gesù' violin, 'ex Kreisler'. Such ownership and playing in performance enhances the instrument’s provenance - on of the three core criteria that make an instrument a good investment.
Only violins and treasury bonds never lost value during any of the time periods measured.
Stringed instruments may the only “alternative” investment that enhances value for the investor and the enjoyment of all when it is used. The icing on the proverbial cake? Studies have shown that violins retain their value remarkably well and keep growing even during downturns. In one study, which compared violins, art, treasury bonds and the S&P stock market index, only violins and treasury bonds never lost value during any of the time periods measured.
Strumenti.com is the only site by which patron-investors can invest in fine and rare stringed instruments via a completely online platform. We make an effort to choose instruments that are most likely to appreciate in value over time, and we pledge that the instruments will be played by promising musicians. Investors can invest in as many violins, violas and cellos as they like, effectively diversifying their risk across several instruments and their impact across several musicians.
If stringed instrument investing sounds intriguing to you, we invite you to start making an impact. The first step is to sign up for our email list to get notified of upcoming offerings.