Forestry Investment Blog

I was researching alternative assets classes that not only could perform as well as the stock market but also provide good diversification opportunities as well as passive income possibility. One asset class which seems a little overlooked is timber. According to several sources, investing in timber has beaten the stock market by 4 percentage points from 1973-2003.

There are several advantages of investing in timber:

• Timber is uncorrelated to stocks
• The price of timber has consistently beaten inflation by 3.3% over the past decades
• Unlike other commodities, trees grow every year by 4% – 10% and as they age their wood becomes more valuable
• Even if prices decline, you can decide not to cut your trees in a given period. Your trees would be growing no matter what you decide to do with them.
• You get certain tax breaks – your profit is taxed as a capital gain. On top of that, as timber is cut, another tax break called a depletion allowance kicks in.
• You could invest in timber REIT’s, which are publicly traded on NYSE.
• The Food and Agricultural Organization of the United Nations forecasts that world demand for wood will nearly double by the middle of this century.
• The USDA-Forest Service projects that demand for U.S. forest products will reach 25 billion cubic feet annually by 2050, up from nearly 18 billion in the 1990s.

The Forestry Investment Blog is sponsored by Greenwood Management. For more information on investing in Timber please click here.

This entry was posted on Thursday, September 2nd, 2010 at 9:55 AM and is filed under Brazil, Forestry Investment, Forestry Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.