Protecting capital is as important as getting capital to work for you returning a dividend.
Is that possible through investing in Forestry?
Over the last 30 years forestry has outperformed traditional investment vehicles, such as stocks, bonds and property, consistently showing investors high returns and low volatility.
Forestry is regarded as a very strong inflation hedge due to the fact that timber prices continue to float above the rate of inflation even in the face of the harsh economic downturn and poor performance elsewhere.
According to the IPD annual Forestry Index, 133 commercial forests returned 18.4% last year and have averaged a staggering 21% a year since 2010 which is easily outgrowing the FTSE 100 share index which returned an average of 7.7% and commercial property which made 9-10%.
So why does forestry do so well?
Forestry gives investors a level of price stability over a longer term period that is more comparable to fixed income instruments as opposed to higher performing equity instruments.
Due to the fact that trees continue to grow, if the price for the timber is low then you can simply let the trees continue to grow until a desirable price is reached, this means that you get the right price AND the quantity of timber would have increased. When timberland is included in a diversified portfolio, returns tend to smooth over time, thereby reducing the overall portfolio’s risk level.
In addition to lower risk returns and low volatility, timberland investments enjoy low correlations with other asset classes. Combining timberland in a diversified portfolio can lead to a more efficient portfolio. There tends to be a positive correlation between timberland returns and inflation. This indicates to a certain extent that timberland investments provide a hedge against inflation.
Favorable Supply and Demand
Historically, demand for wood products has a high correlation with worldwide population growth. World population is expected to increase 41% until the year 2050.
Although natural resource timberland investments are relatively illiquid, liquidity is normally achievable in a moderate period of time.
Timber is a renewable, natural resource that provides ecosystems with benefits such as clean air, clean water, and wildlife habitat and carbon sequestration. Usage of timberland plantations ensures the preservation of natural forest lands for future generations.
Until a few years ago, retail investors were mostly shut out of this market. The deals were too big, involving thousands of acres and tens of millions of dollars.
Big investors, like university endowments and insurance companies, have long allocated money to timberland in places like Oregon’s fir-and-spruce forests, Georgia’s pine plantations and Appalachia’s hardwood groves.
Now it is possible to invest in forestry directly with land ownership via EcoCrops International.
To view their website and the latest forestry investments they have available click here.
For more information contact: Mark Stevens – firstname.lastname@example.org – 93.220.1207