Timber Outperforms All Other Asset Classes
The next seven years will see timber outperform all other asset classes, forecasts Jeremy Grantham, chief investment strategist for Grantham Mayo Van Otterloo, which currently has $106-billion under management. Timber has produced annual returns that have often matched or outpaced the S&P 500 over the long term, but with notably less risk. Between 1971 and 2010, timber boasted average annual returns above 14%. In 2008, while the S&P fell 38%, the value of timberland rose 9.5%. When timber is compared to gold over the past dozen years (1991 thru 2010), timber wins by a wide margin of 11.6% annual gains, to gold's 7%, according to a Bank of America report.
So why then do most investors own no timber?
The answer to that, historically, has been access. There are publicly traded shares investors can buy, exchange-traded funds (EFT's) and timberland real estate investment trusts (REITs), but they're by no means a pure play on timber. Ideally, you want to own timber outright.
Timber is a longtime favorite of some of the top investors in the world. Ted Turner and Jon Malone own millions of acres of timberland; Harvard University's Endowment holds as much as 10% ($3 Billion) of their portfolio in timber, and Boston-Based John Hancock owns 5.3 million acres on behalf of its institutional and rich clients. The wealth creation and wealth preservation attributes of timber have long been a defensive investment decision shared by the wealthy; and now the average Joe can buy in, too.
Average investors have been hunting for the riches of the forests for years, and now they can find the financial shelter it provides there by working with Maderas Futuro, S.A. With a significant sawn lumber purchase contract in hand, the company is perfectly positioned to become one of Central Americas leading hardwood growers. Maderas Futuro, a privately owned Central American company headquartered in Southern Nicaragua, specializing in the managed growth of precious tropical hardwoods for local and worldwide export markets.
While most of the timber Maderas Futuro grows is corporately owned, a few years ago the company began growing hardwoods on behalf of private owners. This approach affords average investors direct timber ownership, and, with it, access to the above-average risk-adverse returns timber has historically produced.
The correlation between timber and other assets is low, which means timber is not very likely to lose money when say, stocks are tumbling. After all, trees grow through bear markets, they grow through bull markets, they grow when the economy is good, they do the same when the economy is bad, and they keep on growing through everything.
If capital preservation is important to you, then timber should be part of your balanced portfolio. If generating income during retirement is something you need, then timber can provide this. If safely passing your money on to heirs is important, nothing beats timber in accomplishing this.
