Timberland Investment

Timberland investments are what they sound like: investing in land with timber (trees) on it.

Returns on timberland investments include biological growth (trees gain value from growing), product value growth/price appreciation (assuming those trees will be cut down one day, to be used for paper or houses), and land appreciation (land prices rising as the surrounding area becomes more valuable).

Why bother investing in timberland? It’s a tortoise...slow and steady growth. Or, like a tree. It’s also a good diversification tool, and a way to hedge against inflation that the rest of your portfolio is likely defenseless against. The real price of timber rises over time, unlike many products, whose value is more degraded via inflation from rising prices.

Before you hit “buy” on a timberland investment, know that they’re usually only bought by large companies and brokerages (though there are ETFs, like Guggenheim Timber), and they don’t come without risk. If the timber is harvested when prices are depressed, the investment will reflect that loss of value. As with all organic assets, timber is subject to potential damage, like forest fires. Or the more subtle enemy, erosion.

And while timber is largely separated from the whims of the stock market averages, it is certainly affected by the housing market, as a fall in demand for housing results in less demand for timber, too.