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Farm and forest ownership may provide a balance of income, inflation protection, personal satisfaction, and much more to consider.
In recent years, interest in farm and forest investments has been renewed, and more and more clients are seeking information on investing in arable land. This uptick in interest is attributable to many things. Given the financial crisis, more investors are seeking tangible assets that they can see and touch. And concern has been growing over possible future shortages of the world's natural resources. Additionally, arable land is not as prevalent as it once was, and decreases each year due to urbanization, desertification and changing weather patterns.1
Investing in land could be beneficial to the client for several reasons. Owning farmland or timberland may be a buffer against inflation, what with commodity prices putting pressure on other products. It is also a way to achieve portfolio diversification without investing in riskier stocks or bonds. It offers investors a potential solution when clients are seeking out real assets. And it is largely unaffected by the extreme movements of the financial markets, given that the land or product itself should always be able to serve a purpose. "We're seeing a lot of good signs and key indicators in today's real assets market," says Dennis Moon, head of the Specialty Asset Management team at U.S. Trust. "We think now's the time to seriously take a look at farmland and timber."
1 Food and Agriculture Organization of the United Nations.
Diversification does not ensure a profit or protect against loss in declining markets.
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