Jan 6, 2013

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The Attraction of Timber Investments

timber investmentsIn recent times, timber investments have become ever more popular. By and large, this is due to the fact these investments are deemed to be a way of shielding your portfolio during difficult economic periods. Institutional investors, along with retail investors, have begun to use timber investments as a means of stabilizing their portfolios. Timber has become an excellent replacement for stocks and bonds, which are regarded as more risky financial products at a time when the economy is reeling.

Stability in Timber Investments

One explanation as to why timber prices are so stable (and such a safe investment) is because the prices are decided in advance. Supplier contracts allow manufacturers to hedge possible price movements in the market. This makes timber investments a more sensible option for people searching for lower risk investments.

Timber Investments Cash Flow

Often, it can take some time before a timber investment will mature. After you have a sizable investment, you will probably have to wait numerous years before your investment is profitable. An investment’s rate of maturity will depend on the type of wood you are investing in, because no two trees will grow at the same speed.

Intriguingly, sometimes, it is financially beneficial for a firm to harvest trees prior to the intended period. The reason for this is that trees are utilized for several different purposes, and they do not always have to be completely mature. Frequently, it will depend on the market’s current supply and demand as to whether trees are harvested earlier or later.

The need for timber is constantly growing, in spite of increased recycling levels across the world. Investing in an industry that is in constant demand is a wise financial choice. Also, timber investments are good because they consistently achieve better returns than investing in the stock market.

 

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