A forestry investment is a way for you to invest in the future health of the planet and make money. Like the trees themselves, these investments are steady and mature slowly. In this article we will look at forestry investment, why it promises to be one of the most in-demand investment classes of the future. The best part is, it could be more affordable than you realised.
What Is A Forestry Investment?
A forestry investment is an investment in a company that grows trees to sell for timber or paper. You invest in forest land and get paid when the trees are harvested. Trees grow slowly, so this is a long-term investment. It might take 20 years before investors see returns.
Another type of forestry investment is investing in trees that produce a fruit or truffle. These can produce returns much faster. Typically, after only 3 or 4 years.
What Are The Benefits Of A Forestry Investment?
Forestry is one of the few investments that actively helps make the world a better place. Forestry is environmentally sound, reducing our carbon footprint and helping to bring natural ecosystems back into balance. Deforestation is a major global problem and a forestry investment is a way of fighting back agains the loss of the planets trees.
Traditional investments often come with moral and ethical concerns. Large corporations increase their profit margin by paying substandard living wages to workers in 3rd world countries. Big banks nearly crashed the world economy in 2008, thanks to their greed and corruption. A forestry investment is the polar opposite to this, and a chance to use your money as a force for good.
On the financial side of things, forestry is one of the least volatile investments available. Prices have been steadily increasing since 2008. Forestry is a great way to diversify, as it has little correlation with the stock market, or global economy.
The chaos of Wall Street sees wild price fluctuations as the bull and bear cycles go round. In the still of the forest, trees keep growing regardless.
How Can I Invest In Forestry?
There are two main ways to invest in forestry. The first is via direct investment. This involves an investor paying for an area of land, or specific number of trees. Management and maintenance of the trees is left to a 3rd party.
The second way to invest is known as a closed end fund. This is where investors buy shares in the company. If the price of timber goes up, the company and shares also become more valuable. Companies promoting this model tend to be more profit orientated and are likely to focus on cheap, fast-growing trees. These aren’t always good for the native ecosystem.
Is Making A Forestry Investment Expensive?
Most, but not all, forestry investments require significant capital. The exception is truffle producing trees. Starting at just over $39,000, this is the most affordable forestry investment we know of. It also offers better returns than traditional forestry. But more on that later.
To invest in timber producing trees such as the Douglas-fir, Redwood, or Lodgepole pine usually requires a minimum investment of $50,000. Forestry has historically been an investment for the wealthiest in society, and most packages are tailored to those wanting to invest hundreds of thousands, if not millions of dollars.
What Are The Downsides To Investing In Forestry?
One big downside is the amount of capital needed to make an investment. There is a reason that forestry investment tends to come from hedge funds and other major institutions.
Forestry is a low-liquidity investment, too. Once you invest, you won’t be able to move your money for decades. It might take decades to receive your first payment too.
There can also be an ethical downside if you choose to invest in a major forestry corporation. These companies have been known to employ dubious investing and growing methods. This is especially true with corporations who invest in 3rd world countries. There are many cases of local and indigenous populations being forcibly removed to make way for forestry land. There is also the issue of growing non-native trees, which offer little ecological benefit, and can harm the soil.
What Are The Alternatives To A Forestry Investment?
This depends on whether you want to make an investment that is both ecologically and environmentally beneficial, or not. If not, stocks, bonds, and real estate are always popular places to invest money.
If you are looking for an ethical alternative to forestry, then a farming investment is an option. Fruit trees or a stake in a coffee farm fit the criteria, but profits tend to be fairly low. These are high volume, low margin crops, and big returns on investment just aren’t possible.
Another option is truffle producing trees. This investment offers all the eco-benefits of forestry, but with higher returns. In fact, the returns are comparable to what you could hope for from a wise stock market investment. Like stocks, but unlike forestry, you can expect annual payments.
Should I Invest In Truffle Producing Trees Or Forestry?
Truffle producing trees come with the same benefits as a traditional forestry investment. The forests help reduce carbon in the atmosphere and provide valuable habitat for native wildlife. Like timber, ruffle producing trees are tax exempt, and easy to pass onto future generations. Truffles provide your portfolio with an important layer of diversification that can protect you against market downturns.
However, truffle producing trees have some unique advantages which make them the better investment. Firstly, truffle investors receive their first payments sooner. The truffles that grow on the trees are usually ready to harvest by the 3rd year. After this first harvest, you can look forward to annual returns that increase each year. The trees planted by Truffle Farms Europe are native to the land and require very little water.
As mentioned before, the returns from truffles are also higher than from timber. Black truffles are one of the world’s premium foods, and prices have been rising dramatically. Conservative predictions are for an ROI of 847% over the 30-year investment period. Black truffle prices have been steadily increasing meaning that number could still rise.