Especially after a year like 2020, predicting the future is a risky game for investors. More than ever, alternative investments should be on your radar. If you've never thought of farmland as an investment, now is the time to consider it. Historically, farmland has proven to be one of the best long-term investments, outperforming stocks and bonds with double-digit total yearly returns over the past four decades and with very low volatility.
Below are just four reasons why investing in farmland is a golden opportunity for savvy investors.
The current economic climate has sent investors scrambling for low-risk investments likely to produce consistent returns regardless of how bad the economy gets. As a result, farmland is becoming that much more coveted. Though farmland is comparably illiquid, it provides consistent and strong returns, especially when juxtaposed against other asset classes.
American farmland returns have similar, and in some cases less volatility than the returns of other investments such as 10-year bonds and even the S&P 500. Though farmland return volatility is comparably low, it has outperformed the aforementioned bonds, providing higher yields. It simply does not make sense to invest in a low-yield bond that is debt-based or the comparably risky S&P 500 when farmland is likely to produce consistent gains regardless of the state of the economy.
In other words, if you invest in farmland, you’re investing in a product that has nearly 7.9 million eager consumers for the goods your farm generates. That is, of course, assuming you invest in food-producing farmland.
“You buy 100 acres of farm land and it will produce for you every year. You can buy more farmland, and all kinds of things, and you still have 100 acres of farmland at the end of 100 years.” – Warren Buffet | Forbes.com
As the turmoil of a recession kicks in it pays to invest in real assets. Especially those that produce something that consumers actually need to survive. Faith in fiat currencies may waiver and stocks will ebb and flow, but people will always need to eat.
They’re not making more land but we are making people. Investing in the farmers that can feed those people might be the best financial decision you can make.
A diverse portfolio is essential for spreading risks and profit points so that if one industry has a bad year, it doesn’t completely wreck your retirement in one fell swoop. The one thing you should note about farmland as an investment is that it varies when it comes to stability and favorability. For instance, land almost always increases in value over time. The land itself will likely retain its value.
However, choosing certain crops may pose a greater risk as they are vulnerable to things like weather, disease, and market fluctuations. When selecting the type of crop to invest in, it's a good idea to check that commodity's price history and global demand.
Ultimately, farmland adds a degree of diversity that is unlike most other investments you’re likely to have in your current portfolio, helping you to spread your risks.
Robert Frost once wrote, “Nature’s first green is gold.” Today that holds new meaning for investors who are savvy enough to invest in farmland.
Gold has been the standard when it comes to hedging your investments. However, farmland has consistently outpaced gold when it comes to appreciation. More importantly, the differences aren’t even close. Farmland is the clear winner and has been for the last three decades. And that’s just the land. It doesn’t even include the value of crops grown on farmland.
In the past, investing in farmland was very expensive. It was on the investors shoulders to purchase the land, pay a manager (or learn to farm themselves), foot the bill for all expenses, equipment etc. Today, there are options that are a lot more affordable and with less risk.
FarmFundr is a farmer-owned, equity crowdfunding platform focused on specialty crop operations in the United States. We provide investors the opportunity to take fractional farmland ownership in high profit potential farmland operations that are managed by expert American farmers. For as little as $10,000, investors can own a share of a high-profit potential farm operation and the land it's on. Getting started is simple. Create a complimentary account and explore available farmland investment opportunities.
In addition to our crowdfunding opportunities, our FarmFindr program is designed to create custom farmland investments for investors who'd like to take sole ownership of a farm.