Five Surprising Reasons The Wealthy Have Invested In Timberland For More Than 100 Years
If you were asked to describe the “perfect” investment, you’d more than likely say something similar to this: The perfect investment would be something that is ultra-safe, above-average performing, have fairly good access to liquidity, and be able to perform for long periods of time with it being too negatively affected by market busts.
Now, of course, many will say that such an investment vehicle is impossible to find. But I’m going to show you why such a vehicle is not only accessible, buy why this low-risk, high-return “alternative” could be the best investment most people never make.
Timber has quietly been one of the top investment choices of the wealthy, and I want to share with you five reasons why they insist it is part of their portfolio, and why you should too.
Reason #1: You’ll make consistent profits—with returns averaging 15% a year!
Timberland is the BIG secret the wealthy have kept to stay wealthy. It is without a doubt the best-performing investment of the past 100 years.
Timber has an average annual return of 15% per year since 1987—without the gut wrenching volatility of the stock market and dangers of the bond market. By contrast, the S&P has returned just 11% a year. On a $50,000 investment, that’s a difference of $1,138,847.
In 2008—when the S&P crashed 38%—timberland gained 9.5%. And that’s no fluke. During the Great Depression, when stocks fell 70%, timber gained 233%. It also outperformed the S&P during the market downturns of 1911–1920 and 1966–1981.
And bonds can’t keep up with inflation. Since 2010, inflation has averaged 3.5% a year.
Yet the interest rate is now 0.8% on 5-year Treasury bonds and 3.2% on 30-year bonds. With a 5-year bond, investors are handing over $100 to get $93 in return. Even real estate can’t touch it! During the biggest real estate boom ever—from 2001 to 2006— real estate prices rose just 12.47% a year—a far cry from timber’s 15% a year. More importantly, while real estate crashed in 2008, timber just kept on churning out double digit returns.
Reason #2: Safe, no-worry retirement investing.
Stock investing is dangerous. It’s volatile. It’s very unpredictable. It’s not what you want for a safe retirement investment. That’s why you should take a closer look into investing in timber.
Instead of worrying about the next downturn in the stock market, you can relax and watch the value of your timber grow and grow—on average of 15% a year.
Reason #3: Rising demand practically guarantees the double-digit returns will continue.
Over the past 40 years, global demand for hardwood has multiplied 25 times. And with the world’s population expected to rise by as much as 54% by 2050, that demand is almost certain to multiply.
No wonder the United Nations’ Food and Agricultural Organization’s 2005 Global Forest Resources Assessment concluded that world consumption of wood and wood-related products will rise by 60% over the next 25 years.
Rising demand is one of the reasons why billionaire investor Jeremy Grantham is bullish on timber. He’s the Chief Investment Strategist for Grantham, Mayo, Van Otterloo—a global investment firm with more than $106 billion under management—and expects timber to outperform all other asset classes for the next 7 years.
In fact, Grantham says, “Timber is the best long-term investment there is. It is the only low-risk, high-return asset.”
And he’s not alone. A report from J.P. Morgan says that timber “…provides an excellent complement to the traditional asset classes of equity and fixed income. From a portfolio management standpoint, timberland provides reduced volatility [and] superior risk-adjusted returns…”
Reason #4: Unbeatable diversification for your portfolio.
Timber is also a great way to provide balance and diversification to your portfolio, simply because it continues to rise even when stocks and other investments are falling.
In the technical terminology favored by professional investors, timber sports a low correlation with most asset classes of less than +0.1. So adding timber to your portfolio enhances the potential for return while reducing your risk at the same time.
Reason #5: The wealthy and big institutions love investing in timber.
One of the key factors that sets wealthy investors apart from average investors is that the wealthy take very few risks with their money.
They know how difficult it is to make up losses—so the wealthy strive hard to never lose money by focusing on long-term investments that don’t include the risks of stocks, bonds and low returns.
This is one of the reasons why billionaires, elite endowments and legendary fund managers have put billions into this little-known but powerful wealth-creating asset. In fact, according to a report published by Responsible Investor, between 1981 and 2005, it’s estimated that institutional investment in timber and forestry assets grew from approximately $4 billion to more than $18 billion.
Alex Wilson is Executive Director of Marketing and has the responsibility for the identification and evaluation of forest investment and strategic marketing opportunities. Mr. Wilson is also responsible for timberland acquisitions, direct client accounts, and locating short-term and long term timber contracts. Mr. Wilson has both international and multi-industry experience in strategic corporate growth, management operations, and visionary planning. In addition to his position with Maderas Futuro, S.A., he remains a managing consultant to Paradise Development Holdings, S.A. , and has since 2001, directed the company to performance improvement initiatives focused on building internal capabilities in both strategic marketing and real property development processes. Alex will be a featured presenter at EscapeArtist’s Global Online Summit, May 12-23. Click here to learn more about Alex and the dozens of globalized living experts who will share their experience and wisdom at the Summit.
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