WHY EVERY INVESTOR SHOULD INVEST IN TROPICAL TIMBER
WHY EVERY INVESTOR SHOULD INVEST IN TROPICAL TIMBER
The Ultimate Agricultural Investment - Investment in High-Grade / High-Value Tropical Timber: In the pursuit of consistent, above-average returns over the long term, investors often adhere to traditional principles centered around diversification—embracing a mix of U.S. large-scale and small-scale stocks, Bonds, REITs, Commodities, and Real Estate. However, this adherence to conventional models has caused many to overlook non-traditional investments that have propelled the world's most successful portfolios. Have you ever considered investment in timber? Despite the proven success of this asset class among the uber-wealthy, less than 1% of investors have explored its potential. While mainstream investment avenues like stocks, bonds, and real estate dominate discussions, timber stands as the untapped #1 asset class, often excluded from the recommendations of mainstream financial experts and wealth management firms. As we contemplate future investment strategies, it's essential to consider the often-overlooked and resilient world of investments in tropical timber for sustained, long-term growth and security.
The reason why many investors fall short? Most lack the patience required for perpetual, steady growth, often seeking immediate profits and frequently changing investments. This impulsiveness is compounded by a fundamental oversight—failure to grasp the importance of loss avoidance and illiquidity. If you were to survey 100 investors about their preference between instant liquidity and illiquidity, all one hundred would likely opt for liquidity. What many haven't realized is the concept of the illiquidity premium, representing the enhanced return associated with holding an asset for an extended period. In simpler terms, investing in less easily liquidated assets, such as investments in TIMBER, typically yields a greater return due to the inconvenience of prolonged holding periods. Consider this, especially if you're in your 30s, 40s, or 50s, enjoying a successful career. While immediate financial gains may be tempting, planning for the financial position you desire in retirement is a prudent early consideration. This applies equally to high-earning professionals like athletes, actors, and artists. Ensuring your money grows exponentially demands thoughtful consideration, as financial stability is not an automatic guarantee.
Economic cycles, as evidenced by historical events, have proven capable of devastating millions of investors in the past, with the potential to do so again in the future. Constructing a robust financial plan with careful consideration is the key to enjoying a fully funded retirement, mitigating the inherent risks associated with the traditional financial system's ups and downs. Notably, Wall Street has demonstrated a pattern of delivering financial devastation precisely when investors need their money the most, as witnessed during the 2000 Dot-Com bubble/burst and the 2008 Global Financial Crash. These events resulted in the evaporation of billions of dollars, leaving millions of investors, particularly those nearing or in retirement, facing profound devastation. A strategic and well-thought-out financial plan becomes imperative to navigate these uncertainties and secure a stable financial future.
Wondering about an asset to enhance your investment portfolio, providing secure growth and above-average returns without the threat of typical economic downturns? Fortunately, there exists one such asset that has demonstrated exceptional performance for centuries, serving as a cornerstone in the wealth plans of countless ultra-wealthy investors— investments in timberland. Renowned billionaire fund manager Jeremy Grantham emphasized its unique attributes in 2001, stating, "Timber is the only low-risk, high-return asset class in existence." Despite being unfamiliar to many, timber has consistently displayed a steadily rising price over extended periods—200 years, 100 years, 50 years, and 10 years. Grantham contends that, in real terms, a unit of wood has outperformed the S&P over much of the 20th Century, making timber the optimal long-term investment choice. The National Council of Real Estate Investment Fiduciaries (NCREIF) publishes a timberland index patterned after the NCREIF Property Index. which is well known for measuring commercial real estate returns.
NCREIF compiles the data from members who submit return information specific to the properties they manage. This becomes the basis for the composite return figures for the timberland asset class. Timberland is considered a “real” asset. It is real in terms of a hard asset that you can see and touch. It provides a “real” rate of return, meaning it returns cash back to the investor and is positively correlated to inflation. Projected timberland returns are typically calculated in real terms (without the effects of inflation). In addition, timberland has a unique biological growth attribute. Even when timber is not harvested and sold as logs, the trees continue to grow in size as well as value. There's a long list of reasons why investments in highgrade timberland, investments in high-value timberland proves to be a robust strategy, consistently yielding substantial returns. The key advantage lies in the biological growth of trees, which continues unabated regardless of stock market crashes, political uncertainties, or economic downturns. Particularly, tropical species trees in or near natural rainforests exhibit remarkable annual growth rates. Trees emerge as a resilient asset, unaffected by external forces, persistently growing through various economic and political landscapes. This inherent biological growth sets investments in timberland apart, offering an assured investment growth seldom guaranteed by other asset classes. Adding to its appeal, the price of wood has demonstrated consistent growth over decades, surpassing the inflation rate. According to investment expert Jeremy Grantham, stumpage prices—the value of wood on the stump—have outpaced inflation by 3% annually for the past century. Unlike depleting resources like gold or oil, timberland stands as a replenishable resource, adding to its enduring financial attractiveness.
Trees, as a sustainable resource, play a vital role in restoring degraded and deforested lands—an environmental boon that concurrently presents a lucrative opportunity for investors and entrepreneurs. While the timber industry boasts a long history, recent innovation has highlighted sustainably managed timber as a beacon of progress, focusing on improving land quality. The landscape includes institutional timber funds dedicating substantial land for conservation and innovative business models involving smallholder farmers and endangered species. Notably, sustainable timber emerges as a key player in the restoration growth narrative. From an investment perspective, timber's lack of correlation to the stock market makes it an attractive and resilient option. Trees remain impervious to political events and government shutdowns, making investment in timber a stable and promising long-term investment.
Diversifying a well-balanced portfolio is essential for a long term strategy. Learn more about all of the aspects of this important asset by joining one of our trips to The Mayan Biosphere where Las Azucenas has created this unique opportunity.
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