Forestry and timber investing - the very concept seems either dull or extremely alien to most people. After all, its' much more satisfying to follow the rest of the herd and chase the latest hot social networking stock. However any investors - especially those looking for true diversification and stable returns - are making a real oversight by ignoring the value timber investments could bring to their overall portfolio. Noted stock market skeptic Jeremy Grantham of GMO Asset Management has long been a fan of timber investments (whilst being quite pessimistic about the long-term returns on offer from global equities at their current valuations), and when Mr. Grantham has an investing opinion it is well worth listening to.
There are a number of factors that make timber and forestry investments attractive:
1) First, as a "hard asset," timber investments are an excellent hedge against inflation.
2) The returns on timber investing have been quite impressive. According to the National Council of Real Estate Fiduciaries in the United States (NCREIF), timber returns since 1987 through 2010 have averaged 155 a year, whilst the main US stock index the S&P 500 has gone up only 9.1% annually. Furthermore, on average the price of harvested timber itself has gone up 5% per year over the last 100 years.
3) Timber investments also perform extremely well when stocks are in a Bear Market. For example, in 2008 when stock indexes lost as much as 40 - 50%, the NCREIF's main timber index actually went up 9.5%. As another example, during the Great Depression when stocks fell anywhere from 70 - 90%, the main US timber index went up 233%.
There are a number of factors that make timber and forestry investments attractive:
1) First, as a "hard asset," timber investments are an excellent hedge against inflation.
2) The returns on timber investing have been quite impressive. According to the National Council of Real Estate Fiduciaries in the United States (NCREIF), timber returns since 1987 through 2010 have averaged 155 a year, whilst the main US stock index the S&P 500 has gone up only 9.1% annually. Furthermore, on average the price of harvested timber itself has gone up 5% per year over the last 100 years.
3) Timber investments also perform extremely well when stocks are in a Bear Market. For example, in 2008 when stock indexes lost as much as 40 - 50%, the NCREIF's main timber index actually went up 9.5%. As another example, during the Great Depression when stocks fell anywhere from 70 - 90%, the main US timber index went up 233%.
