When we think of making investments, we usually consider the stock market, tracker funds, property and gold. However, it is a good idea to think about alternative types of investments in order to balance risk, to provide some security in periods of international crisis and to make ethical investment choices.
Woodland investments are an interesting prospect. The UK currently imports 80% of the timber that it uses each year. This means there is a market for home grown timber – so why not think about an investment in woodland and timber? What do I know about trees I hear you say! Never fear there are plenty of advisors out there who can provide all the help you need to buy, manage and capitalise on a UK woodland investment.
Do woodland investments make financial sense?
Compared to a stock market investment, the value of an investment in woodland is a lot less variable. The factors that make the stock markets fluctuate rarely affect the value of woodland – oil price fluctuations will hit the FTSE but they won’t stop your trees growing. That is because the growth of your investment is tied to the biological growth of your trees which is completely under your control. Your investment is not affected by the global events that rock the stock markets and are completely out of your control.
Because of this a woodland investment is more likely to perform in line with your expectations and it also provides a substantial contribution of cash – both of which reduce the risk of the investment. In addition, it is an effective inflation hedge. All this means it is a good investment to have in any mixed portfolio. This is why large organisations like pension funds have been investing in woodlands.
Other reasons for woodland investments
Woodlands can also offer other benefits which have made them attractive as alternative investments. Woodlands provide a habitat for animals and plants and also act as an effective carbon sink. For these reasons they make great choices for the environmentally conscious investor.
The greater the mix of tree types you plant the richer the habitat but more complex habitats require more management and will not produce as much revenue. So, you as an investor can balance your need for cash returns against the extent to which you wish you create a rich habitat. If you decide not to plant single species and aggressively harvest you can create a productive natural habitat. By planting more variety and adding wildflowers you can provide an ecosystem for thousands of species of plants and animals whilst still providing a cash crop for the investor. This habitat can be opened up as a private or public recreational space as well. Even if you do plant a single or couple of species and aggressively harvest you can still use the woodland as a public or private recreational space.
It’s not just timber that makes money
Woodlands can provide places for plenty of other businesses which can be run at the same time as a timber farm. Wedding barns, kennels, paintballing, go karting, kids’ parties and adventure/farm parks are all options. Even if you don’t want to run these businesses yourself you can lease some of your land to other business owners. This can give you a steady monthly income to fill the gaps between the large cash injections you will receive from periodic timber harvesting.
If you are an experienced forestry manager or investor you wouldn’t be reading this article. For the rest of us we can legitimately ask – What do I know about woods? No one should make an investment in an area they know nothing about and don’t have any expertise. So if you are interested in a woodland investment you need to find and use a specialist who can advise you on buying the right land, get any red tape dealt with and help you develop a plan for creating and or managing your forest.
What do forestry management companies do?
With experienced advisors on hand to help you invest with confidence in the right plot. They should also help you determine what you want the land to deliver financially, environmentally and recreationally and develop a management plan that will deliver.