ShinnTedford185
Investing is forestry has been utilized as a portfolio diversification and optimisation tool by wealthy investors for many years, and now many smaller investors are trying to find alternative assets capable which generate returns that don't rely on the performance of volatile markets. In fact many large institutional investors such as pension funds, university endowments and specialist hedge funds are acquiring productive natural resource property such as farms and timber plantations in order to reduce volatility and align portfolio growth with increasing trends in demand for commodities from an ever-increasing global population. Social and economic growth in China alone will probably see demand for recycleables for example food, timber and increase exponentially as huge numbers of people move from rural areas into urbanised cities and require greater inputs of food, energy and recycleables for infrastructure.
Let's consider some of the key reasons that the investor might consider forestry as part of a diversified portfolio of investments.
Direct forestry investments involve the purchase of land assets, through either freehold or leasehold title. This land might be a current forest stocked with trees of various species ideal for harvesting in order to sell as constructions timber, pulp of paper and other associated wood products, or it may be vacant land with suitable topography, infrastructure, local climate and soil quality ideal for the establishment of the new forest.
Trees are managed by an experienced forest manager who'll arrange the management, harvesting and replanting of trees at the relevant reason for the forest life-cycle, along with the processing of raw timber into more valuable downstream products such as sawn lumber which commands a greater price in the open market. The commercial interests are looked after by a skilled timber business professional using the right local contacts required in to sell the harvested timber. Who owns the home benefits from the revenue created from the sale of the timber.
This asset class is considered a non-correlated investment because returns aren't produced from financial markets; this means investors can help to eliminate their exposure to volatile equities and reduce the probability of sever financial losses if the markets fall suddenly as witnessed within the most recent financial crisis.
Actually the financial go back to a good investment in productive timber properties comes mostly from the biological growth of the tree into valuable timber. Each year trees continue to grow in size and therefore command a greater price in the timber markets regardless of whether financial markets or the global economy is booming or falling. What's more, the cost per unit of timber also increases as interest in sustainably sourced timber from a growing global population also increases, developing a two-pronged capital growth strategy, and should timber prices fall (which they do if demand is low), investor may simply leave their trees to grow for an additional year, letting the biological growth offset any price depreciation.
In conclusion, it is to explain there are obviously risks to forestry investment, however these risks are quite different to the potential risks associated with traditional financial assets. Timber properties are physical tangible land assets that will never depreciate to nothing, and then grow in size and value regardless of the economic weather, so will make for an interesting tool for investors concerned about the state of the global economic recovery and seeking an alternate investment that provides a high amount of capital security and superior roi.
Prospective Investors are advised to ask for the counsel of an experienced professional real estate investment consultant with a track record of sourcing and delivering successful investment projects in the forestry sector in order to properly comprehend the risks and opportunities related to this niche asset class.
