There are several investment opportunities all around the globe. Whilst some guarantee massive returns on investment, yet one can just manage some amount of capital gains or cash flow in others. Therefore it becomes important to know the type of investment that can cause a yield than a plummet in capital.
One of such investments that may cause smiles on the faces of investors is the timber farmland investment. Every now and then we see peasants in their farmlands making some meager profit, and then we are quick to debase the profession of farming. However, it is important to note that timber and farmland is a different kettle of fish altogether.
Most people are very familiar with investment products such as stocks, mutual funds, real estate, commodities, bonds, etc but they have no idea that they can also invest in products such as timber farm land.
What Makes Timber Farmland Attractive to Investors?
Timber Farmland Investment is classified under alternative investments. Alternative investments are very different from the traditional investments – such as bonds, stocks, funds etc. – in the sense that they are not influenced by the factors normally affecting stocks and bonds.
Risks in timber farmland investment are also very low. This means that it can provide a form of stability to any investor’s portfolio. Moreover, it allows for a certain extent of diversification – a characteristic exhibited by a solid portfolio and because it is a stable investment, it can also serve as protection from inflation and other economic crisis, as well as political crisis.
This is one stable investment that you can afford to stay in for as much as ten years, fifteen years and even beyond. An American expert once said that the return on farmland and timber comes from two sources. The gross-cash gain from farmland which is approximately 6%. Also, costs such as maintenance, insurance, and U.S. Trusts’ management fee which typically gulp approximately 2%.
In addendum, there has to be the long-term appreciation of the basic land values. With timber investment, there is no annual cash payment for the first years, as there is in farmland, and so investors must be pleased that during that time their trees are budding at 4% to 8% a year. This means that when the trees are harvested, returns are recognized over the period of holding.
Now let us quickly consider the steps you need to follow if you want to invest in timber farmland and generate great returns on your investment within the shortest time frame possible;
7 Quick Steps to Invest In Timber Farmland Profitably
1. Research on Timber and Farmland Investment
Your first port of call if you want to invest in timber and farmland is to carry out an extensive research on the industry. The truth is that, no investor would want to put their money in any venture / stock that they have not investigated. So, what is expected of you to do is to study timber and farmland companies to know how their stocks are doing in the open market. Your research should expose you to what you stand to gain when you invest in timber and farmland and also any available risk involved in such investment. Although, people consider timber and farmland as an alternative investment portfolio, but it won’t be out of place if you are well equipped with the knowledge that will help you make informed investment decisions.
2. Compare Stocks
One good advice on how to invest in timber farmland is to be knowledgeable of the stocks at play in the market. Check out all the different types of stocks and compare timber stocks to the other types of stocks. Take note of the performance of timber stocks and compare it to the performance of other stocks.
3. Choose a Reliable Timber Company
Shortlist the names of timber companies that consistently come up with impressive records (these companies are probably the ones that investors want to put their money into). Choose a timber company that has a steady performance in contrast to others. Two of the timber companies with a good reputation in the market are the Rayonier and Plum Creek Timber.
4. Pool Your Cash Together
Once you have made up your mind that you want to create an alternative investment for yourself by investing in timber and farmland, then you are expected to pool your cash together; the cash that you intend investing. In order not to get things twisted, it will be to your advantage to create a special fund / account specifically for investment. It will help you monitor the growth of your investment portfolio.
5. Map out Your Investment Strategy
Most successful investors become successful simply because they have been able to create successful investment strategies overtime. They know where in the industry to invest in per time, when to invest and how far they can invest. Therefore, if you intend generating good returns on your investment, then you need to study the trends in timber and farmland investment and then develop your strategy. Your strategy could be to alternate your investment between timber and farmland companies that are quick in replacing trees immediately after harvesting them and those who don’t et al.
6. Conduct Your Risks Analysis
Although timber and farmland investment is considered to be a stable form of investment, but there are still some form of risks that you will be exposed to, as long as it is an investment that is supposed to give you returns at the end of the agreed period. Natural disaster can strike and that could lead to bad business which can affect the returns on investment et al. So it is important to conduct your risks analysis in order to mitigate any available risk
7. Hire a Stock Broker
You are expected to hire a stock broker to help you out with your investment in timber and farmland. Stock brokers are experts whose responsibility is to help you study the stocks of various timber and farmland companies and give you valuable advice that will help you maximize your investment. If you are lucky to come by a good stock broker, they can help you manage and expand your investments portfolio. They do this at a fee, but the truth is that if you do it on your own simply because you don’t want to pay the required fee, you might likely get your hand burnt. Bottom-line is to ensure that you make use of a stock broker so that you do not end up be penny wise and pound foolish.
8. Analysis the Options before You and Then Make Your Choice
There are various timber and farmland companies whose stocks are listed out there, what you need to do is to compile the list of all the timber and farmland companies within your reach, and them critically examine their growth (trend). It is only normal to put your money in a company that has record of consistent growth.
9. Start Small and Observe
For newbies wanting to invest in timber farmland, it is advisable to buy small timber stocks first and see how these will perform. If the return is good, then expand and build up the investment slowly but surely. Expanding slowly allows them to build their confidence on the stock while they continue to understand the nature of timber stocks.
10. Watch Stocks Grow
Once the stock investment is maximized, there is no need to worry anymore. Investors can relax while watching their stocks grow. Remember, timber farmland investments are stable. There is no need to worry if timber stocks will plunge performance wise because there is an ever increasing demand for wood all around the world. Timber stock is a wise investment; their potential in creating wealth is one of the best in the stock market.
11. Closely Monitor Your Investment
One mistake that some investors make that they end up paying dearly for is the mistake of not closely monitoring their investment. The fact that timber and farmland investment is considered as an alternative investment doesn’t mean that you can’t monitor it closely. You should not allow the fact that you are busy deprive you of the opportunity to maximize your timber and farmland investment. As a matter of fact, if you own several investment portfolios, it is advisable to hire an investment portfolio manager to help you manage your investment portfolio.
Lastly, if you are able to follow the steps stated above, you can start investing in timber and farmland with just a little cash and if you closely monitor your investment, you will see the investment grow beyond your calculations within the shortest time frame