What Is a Timberland Investment?

Timber (lumber) is often seen as a good portfolio diversifier that can hedge against inflation. Timberland investment involves investment in land that producers timber. There are millions of acres of timberland in the U.S. that are owned by pension funds, charitable trusts, individual investors, and universities. Investors can own ওtimberland through a variety of investment vehicles that have a stake in timberland.

Understanding Timberland Investments

The benefits of timberland investments arise from the tendency for demand in wood and lumber products to rise over the long term and are not directly linked to market forces that can af🍷fect other investment instruments like stocks and bonds. Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge.

Investors can take a position in timber by investing in timber ETFs (澳洲幸运5官方开奖结果体彩网:exchange-traded funds), which are comprised of many companies that own forests and produce timber-related products. Also, investors can invest in REITs (澳洲幸运5官方开奖结果体彩网:real estate investment trusts🌸) that contain one owner of forested land and produc✅e timber-related products.

Timberland investment instruments are primarily used by large institutional investors such as public and private pension funds whereby the two main underlying assets are tree farms and managed natural forests. A 澳洲幸运5官方开奖结果体彩网:T🌌imber Investment Management Organization (TIMO) is a financial management group that aids institutional investors in managing their timberland investment portfolios. A TIMO acts as a broker 🍎for institutional clients to find, analyze and acquire investme🐻nt properties that would best suit their clients.

Making a Profit with Timberland

Upward product class movement occurs when trees grow and mature over time, the number of applications for timber increases. For example, trees that are used to make paper typically take over ten years to grow before they can be used for paper pr♒oducts.

There are a fewꦓ sources from which investors can earn a positiv🐬e rate of return on a timber investment.

Biological Growth

Biological growth means t🍰hat as trees grow, they increase in weight and density. As biological growth adds volume, the trees become more valuable on a per-ton basis as they can be used for larger and more unique projects, or else can produce more standard lumber per tree.

Land Appreciation

Land appreciation can occur if the timber is located on valuable real estate. For example, if the forested land is locat🦹ed near a populated area, the land could be converted to a golf course or shopping mall after the timber has been 𓆉harvested.

Price Appreciation

Timber pric✅e appreciation can occur as demand for housing increases. Softwood is typically used in the construction of homes. As a result, an expansionary economy and housing market might lead to increases in timber since demand would be high for softwood.

Risks of a Timberland Investment

༺Timberland investments are not perfect investments meaning th💯ey are vulnerable to risks, which can include:

• Demand for lumber can fall during a recession, causing prices to fall in turn.
• Natural disasters can destroy the forestland eroding an investment.
• Housing market downturns can hurt demand for timber resulting in lower prices.

Real-World Examples of Timberland Investments

There𝔉 are a number of ways to invest in timberland besides buying the land as an individual investor. Some of those investment vehicles include:

Guggenheim Timber (CUT) is an ETF that consists of over two dozen companies that produce timber products or own forestland. The dividend yield on this global timber🌼 fund is typically over 3% 🥂per year.

The iShares S&P Global Timber & Forestry Index ETF (WOOD) tracks the S&P Glℱobal Timber & Forestry Index and typically produces a dividend yield of over 2.5%.

Weyerhaeuser Company (WY) is a REIT that invests in forestland in order to manufacture, sell, and distribute forest products. Weyerhaeuser Co. is one of the larges🦩t owners of forestland in the world.