Factors to Consider When Investing in Forestry
With forestry investment options, investors have put their hard earned money into this industry. This is because this asset class reduces risk while at the same time it outperforms more volatile equity industries. For the last fourteen years, stock investors have faced several risks which include balancing investments in this market and not been able to make sustainable profits.However, forestry investments have advanced and have been registering good profits year after year.For investors to thrive in this asset class there are several structured investment vehicles that they need to take advantage of. For this reason, this article will highlight some of these investment vehicles that make forestry investment option available to the investors.
Apart from buying a section of forestry land, an investor must also find a company that will plant, harvest and trade the kind of trees on their behalf. Even though this may sound simple, this investment strategy poses a lot of questions to investors.Some of these questions include where to find the land to invest in, the type of trees to plant that will be profitable, and which company can offer forestry management services once they acquire the land.
Of course, there will be other things that need to be considered like the start-up capital for buying the land and tree, who will purchase the wood, the selling price of the wood harvested, and the risks associated with this industry.
The market for the wood you have planted should not worry you as there are so many companies that deal with manufacturing timber products which will be interested in buying your timber. Actually, some of these companies will contract you to plant trees for them and they will pay you a fixed price for every tree harvested from your farm.The price you intend to charge for the wood that you will sell should be determined by your farms location, kind of tree species that you want to plant and the quality of timber you expect the trees to give you.One advantage of negotiating timber prices in advance is that it helps you caution yourself against price changes in the future.
To conclude, you should prepare yourself to expect disasters such as fire outbreaks in case you are thinking of doing investing in forestry. Though it is rare for fire outbreaks to occur and if you insure your forest investment then you can be sure that the insurance company will pay your claim in case there is a fire outbreak in your forest.