Investing in Timberland Real Estate

Timber is a Safe Investment Alternative

There has been a steep increase in the prices of precious metals over the last few years.  This is primarily because the investors have been focusing on buying gold, silver and other real assets due to the uncertainty prevailing in the economy and banking system.  Investors have also been skeptical of the efforts by the government to control the economic downturn which, they feel, may ultimately lead to a dollar crisis.  This has made them buy precious metals which, in turn, has escalated their prices resulted in gold reaching the all time high of $ 150/-.

While gold and silver continue to be the most preferred investment option, there are other investment options also from which many have benefited.  Investment in timber is one such option, which can protect you from inflation and give you dividends. As compared to stocks which has the tendency to fall, timber investment can give you regular risk-adjusted returns.  The advantage is that you need to cut down trees and sell timber only when the prices are suitable and leave it for growing when prices are not favorable.  Even cut timber does not spoil if stored.  This makes timber a low volatility asset. 

Investment in timber can be done through trusted and reputed Real Estate Investment Trusts (REIT).   Such trusts include Plum Creek, Potlatch and Rayonier. The minimum yield of these companies has been 3.3%.  Being REITs these trusts pay 90% of what the gain to the investors. A comparison with developed real estate investment has shown that these timber trusts have been performing much better during last five years.  Another study has revealed that as compared to the yield of S&P over last five years, Rayonier gave a higher yield to the investor.

During current time period of sluggish economy, it is important to keep a major portion of your money in real assets such as gold, silver and land.  It has also been proved that Investment in Timber is also another time tested asset which can give you increasing yield as compared to cash deposits and equity investments.  Also, REITs investments in Timber do not have the inherent risk involved in keeping money in equities.