Timber and forestry investment may seem to be extremely alien or dull to many investors. Most of the investors prefer to follow the crowd and put their money in hot investing options like stocks. However, investors who are really looking for stable returns and diversification should consider timber investments.
Timber, as an investment, can bring significant value to the portfolio of an investor. Asset management companies, such as Ethical Forestry, state that timber yields returns that surpass the returns yielded by traditional investments like stocks and shares. Moreover, the investment can be planned in a sustainable and environmentally-friendly manner.
Why are timber investments attractive?
- Being a hard and tangible asset, timber investment serves as a great hedge against inflation.
- The investment has resulted in impressive returns. As stated by the “National Council of Real Estate Fiduciaries (NCREIF)”, in the United States, timber returns during the period of 1987 to 2010 were 15% on an average annually. Whereas, the S&P 500, which is the major US stock index, was 9.1% per year only. Moreover, over the past 100 years, harvested timber price has increased by 5% per year on an average.
- Timbre investments deliver a good performance even when stocks are not doing well. For examp0le, in the year 2008, stocks lost around 40 to 50%. On the other hand, the main timebr4 index of NCREIF increased by 9.5%. As another example, at the time of the Great Depression, the stocks fell by 70 to 90%, whereas the main timber index rose by 233%. The returns yielded by timber and forestry investments have no correlation with those yielded by bonds and stocks. This indicates that timber investments offers true diversification to an investor’s portfolio.
Timber Investments are Sustainable:
Deforestation has become one of the most serious problems the world is facing today. The loss of the tropical forests is a real tragedy. Scientists say that almost half of the planet’s species live in the tropical forests. There are many such species living in these forests that have not been discovered yet. The forests hold large amounts of carbon dioxide. Hence, on cutting them, the entire amount of carbon dioxide is released in the atmosphere. This gas serves as a greenhouse gas, after being released.
Timbre is being driven by a huge and ever-increasing demand. The global use of lumber is likely to double within the next 30 years from now. However, this huge demand is leading to severe degradation of the environment.
The question that strikes the minds when talking about timber and forestry investments is that- Can such investments affect the environment adversely? Fortunately, the answer to this question is no. forestry investments do not mean large scale forest destruction. Timber investments consist of specially designed plantations, where the tree stocks are carefully controlled. The growing trees are looked after carefully, and then the trees are harvested in a sustainable manner. During the harvests, no native forests or tropical trees are cut down. In this way, timber investments are entirely sustainable investments.
Ethical forestry can guide investors on their way to invest in timber. Such companies look after the trees owned by investors and send them the returns for their investments.
Ethical Forestry 