Timberland, when added to a portfolio, offers many benefits to the investor. These include diversification, stable and predictable cash flows, and superior risk-adjusted returns. Due to the negative correlation with other investment classes (stocks, bonds, etc.), timberland can diversify a portfolio to protect the investor from downturns in traditional markets.
Investors have the option to wait out weak markets without losing value. This is due to the biological growth of trees. Basically, that means that regardless of market fluctuations, trees continue to grow and increase in value. Growth rates vary depending on the site and species of the trees. An average growth rate is 4%-6% per year.
Timberland investments usually include the underlying land. This enables investors to capture the land appreciation upon sale of the investment. Owning the land also allows for additional revenue generation from hunting leases, mineral leases, and other sources throughout the life of the investment.
Timberland has historically proven itself to be a safe, reliable investment. It is a good option for investors hunting for a safe investment with high returns.
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