Member Article

Timber investments: where money grows on trees

The turbulence of global stock markets in recent years has created uncertainty for investors throughout the world. Volume on the FTSE 100 has fallen, with more and more investors steering clear of the markets altogether. What with huge swings, less liquidity, and general lack of confidence, investors are looking elsewhere to put their money, somewhere uncorrelated to stock market performance.

Alternative Investments is a generic term used to describe any investment other than stocks, shares, cash, bonds, or property. They include investments into hedge funds, solar panels, fine wine, timber, property, diamonds, film-making, and many other asset classes. They are not usually regulated by the FSA, so any investor would not have the privilege of FSA compensation, nor would they have the FSA ‘seal of approval’. However, if you do your due diligence there are some good opportunities out there, but you must do your due diligence and do it well. There are some alternative investments are very good, with good performance, solid management, and a great opportunity to make money despite any economic downturn.

An increasingly popular alternative investment is into timber. You generally buy saplings or semi-mature trees, pay a plantation company to manage your trees in line with international forestry standards, and once the trees are mature the trees are sold at the then market price. You then receive the proceeds from the sale. The price of timber has generally increased in price, however the growth in value is mainly from the tree itself. You can buy a teak sapling for as little as £38 and is worth anywhere between £600 and £1,500 at maturity. These estimates are conservative, however you must be aware that the actual return could be lower, depending on timber prices when you come to harvest your crop. One great thing about timber is that if the price is low you simply leave it to increase even more in value whilst waiting for the price to improve. Aged timber is generally worth more. The popularity of timber stems from the ease of understanding the investment, and although not without risks, this is an investment which is uncorrelated to stockmarket performance, environmentally friendly, eligible for investment into your SIPP, and where there is multi-industry demand with an ever growing global population.

At Darling Investments, we research alternative investments and provide full due diligence on each investment. We have just completed our research on the timber market but will be researching others in due course. We would be delighted to speak with you about any of our investments, simply contact us for an informal chat.

This was posted in Bdaily's Members' News section by Helen Proudman .